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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Innovation vs. imitation and the evolution of productivity distributions
Organization Unit
  • Michael D König
  • Jan Lorenz
  • Fabrizio Zilibotti
  • English
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.
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Keywords Innovation, growth, quality ladder, absorptive capacity, productivity differences, spillovers