Transitional Dynamics in Aggregate Models of Innovative Investment

Andrew Atkeson, Ariel Burstein and Manolis Chatzikonstantinou

No 25321, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: What quantitative lessons can we learn from models of endogenous technical change through innovative investments by firms for the impact of changes in the economic environment on the dynamics of aggregate productivity in the short, medium, and long run? We present a unifying model that nests a number of canonical models in the literature and characterize their positive implications for the transitional dynamics of aggregate productivity and their welfare implications in terms of two sufficient statistics. We review the current state of measurement of these two sufficient statistics and discuss the range of positive and normative quantitative implications of our model for a wide array of counterfactual experiments, including the link between a decline in the entry rate of new firms and a slowdown in the growth of aggregate productivity given that measurement. We conclude with a summary of the lessons learned from our analysis to help direct future research aimed at building models of endogenous productivity growth useful for quantitative analysis.

JEL-codes: O3 O4 (search for similar items in EconPapers)
Date: 2018-11
Note: EFG PR
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Citations: View citations in EconPapers (4)

Published as Andrew Atkeson & Ariel Burstein & Manolis Chatzikonstantinou, 2019. "Transitional Dynamics in Aggregate Models of Innovative Investment," Annual Review of Economics, vol 11(1).

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Journal Article: Transitional Dynamics in Aggregate Models of Innovative Investment (2019)
Working Paper: Transitional Dynamics in Aggregate Models of Innovative Investment (2018)
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