Endogenous Growth through Selection and Imitation
Title: Endogenous Growth through Selection and Imitation
Publisher: European University Institute
Series/Number: EUI ECO; 2007/26
A simple dynamic general equilibrium model is set up in which firms face idiosyncratic productivity shocks. Firms whose productivity has fallen too low exit, and entrants try to imitate the best practice of existing firms, so that the expected productivity of entering firms is a function of current av- erage productivity. Because of the resulting selection and imitation process, aggregate productivity grows endogenously. When calibrated to U.S. data, the model suggests that around one-fifth of productivity growth is due to such a selection and imitation effect.
Subject: B52; O3; O41; endogenous growth; selection; imitation; firm entry and exit
Type of Access: openAccess