Distance to Frontier, Selection, and Economic Growth

Fabrizio Zilibotti, Philippe Aghion and Daron Acemoglu

Scholarly Articles from Harvard University Department of Economics

Abstract: We analyze an economy where firms undertake both innovation and adoption of technologies from the world technology frontier. The selection of high-skill managers and firms is more important for innovation than for adoption. As the economy approaches the frontier, selection becomes more important. Countries at early stages of development pursue an investment-based strategy, which relies on existing firms and managers to maximize investment but sacrifices selection. Closer to the world technology frontier, economies switch to an innovation-based strategy with short-term relationships, younger firms, less investment, and better selection of firms and managers. We show that relatively backward economies may switch out of the investment-based strategy too soon, so certain policies such as limits on product market competition or investment subsidies, which encourage the investment-based strategy, may be beneficial. However, these policies may have significant long-run costs because they make it more likely that a society will be trapped in the investment-based strategy and fail to converge to the world technology frontier.

Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (889)

Published in Journal of the European Economic Association

Downloads: (external link)
http://dash.harvard.edu/bitstream/handle/1/4554122/aghion_distancefrontier.pdf (application/pdf)

Related works:
Journal Article: Distance to Frontier, Selection, and Economic Growth (2006)
Working Paper: Distance to Frontier, Selection, and Economic Growth (2002)
Working Paper: Distance to Frontier, Selection, and Economic Growth (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:4554122

Access Statistics for this paper

More papers in Scholarly Articles from Harvard University Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Office for Scholarly Communication ().