Reconciling Models of Diffusion and Innovation: A Theory of the Productivity Distribution and Technology Frontier

Abstract

We study how endogenous innovation and technology diffusion interact to determine the shape of the productivity distribution and generate aggregate growth. We model firms that choose to innovate, adopt technology, or produce with their existing technology. Costly adoption creates a spread between the best and worst technologies concurrently used to produce similar goods. The balance of adoption and innovation determines the shape of the distribution; innovation stretches the distribution, while adoption compresses it. On the balanced growth path, the aggregate growth rate equals the maximum growth rate of innovators. While innovation drives long‐run growth, changes in the adoption environment can influence growth by affecting innovation incentives, either directly, through licensing of excludable technologies, or indirectly, via the option value of adoption.

Explaining the Labor Share: Automation Vs Labor Market Institutions

“…The automated technology only employs capital, while the manual technology only employs labor and requires each firm to search for a worker in a labor market characterized by an aggregate matching function and where wages are set by Nash bargaining. In the model, at the time of entry, firms draw an endowment (or capability) from a known probability distribution, resembling an undirected search process (as in, e.g., Benhabib, Perla and Tonetti, 2017). Each firm then combines this endowment with either technology (although with possibly different efficiency levels) to determine its productivity.…”

“…We interpret this productivity draw as an endowment or capability accessed through an undirected search process by each firm (e.g.,Benhabib, Perla and Tonetti, 2017).…”

Looking Ahead at the Effects of Automation in an Economy with Matching Frictions

“…Job creation increases because of one or a combination of two mechanisms. First, as in Guimarães and Gil (2019), an automation-augmenting shock increases job creation if firms can choose technology at the time of entry and firm-entry corresponds to an undirected-technological-search process (as in, e.g., Benhabib, Perla and Tonetti, 2017). Second, automation-augmenting shocks also promote job creation through an alternative mechanism in our model.…”

Critical success factors in e-marketing adoption and implementation among the fast-moving consumer goods retailers in Zimbabwe

“…In addition to their crucial role within the family in the decision-making process of making purchases, they are more financially independent. Additionally, the gap in Internet use in favour of men has also begun to narrow (Benhabib et al, 2021), which makes it necessary for e-marketers that carry out some or all of their transactions online to be fully aware of the effects of gender differences in online purchasing behaviours (Özdemir, 2012;Wang et al, 2016). Presented in Table 4 above are Chisquare test results between the level of education and each critical success factor.…”