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Endogenous Growth through Selection and Imitation
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1725-6704
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EUI ECO; 2007/26
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GABLER, Alain, LICANDRO, Omar, Endogenous Growth through Selection and Imitation, EUI ECO, 2007/26 - https://hdl.handle.net/1814/7166
Abstract
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.