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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Innovation vs. imitation and the evolution of productivity distributions |
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| Institution | Centre for Economic Policy Research |
| Series Name | CEPR Discussion Papers |
| Number | 8843 |
| ISSN | 0265-8003 |
| Number of Pages | 53 |
| Date | 2012 |
| Abstract Text | We develop a tractable dynamicmodel of productivity growth and technology spillovers that is consistent with the emergence of real world empirical productivity distributions. Firms can improve productivity by engaging in in-house R&D, or alternatively, by trying to imitate other firms’ technologies, subject to the limits of their absorptive capacities. The outcome of both strategies is stochastic. The choice between in-house R&Dand imitation is endogenous, and based on firms’ profit maximization motive. Firms closer to the technological frontier face fewer imitation opportunities, and choose in-house R&D, while firms farther from the frontier try to imitate more productive technologies. The equilibriumchoice leads to a balanced-growth equilibriumfeaturing persistent productivity differences even when starting from ex-ante identical firms. The long-run productivity distribution can be described as a traveling wave with tails following a Pareto as can be observed in the empirical data. |
| Official URL | http://cepr.org/active/publications/discussion_papers/dp.php?dpno=8843 |
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| Keywords | Innovation, growth, quality ladder, absorptive capacity, productivity differences, spillovers |