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

Benhabib, Jess; Perla, Jesse; Tonetti, Christopher

doi:10.3386/w23095

Cited by 50 publications

(65 citation statements)

References 17 publications

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“…Other work characterizing the firm size distribution includes Miao (2005), Gourio and Roys (2014), and Moll (2014). Benhabib, Perla, and Tonetti (2017) examine the endogenous productivity distribution in an environment in which firms choose to innovate, adopt new technology, or keep producing with old technology.…”

Section: A Dynamic Model Of Industry Equilibrium With Entry and Exitmentioning

confidence: 99%

Capital Share Dynamics When Firms Insure Workers

Hartman‐Glaser¹,

Lustig²,

Xiaolan

2019

The Journal of Finance

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Although the aggregate capital share of U.S. firms has increased, capital share at the firm‐level has decreased. This divergence is due to mega‐firms that produce a larger output share without a proportionate increase in labor compensation. We develop a model in which firms insure workers against firm‐specific shocks, with more productive firms allocating more rents to shareholders, while less productive firms endogenously exit. Increasing firm‐level risk delays exit and increases the measure of mega‐firms, raising (lowering) the aggregate (average) capital share. An increase in the level of rents magnifies this effect. We present evidence that supports this mechanism.

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Section: A Dynamic Model Of Industry Equilibrium With Entry and Exitmentioning

confidence: 99%

Capital Share Dynamics When Firms Insure Workers

Hartman‐Glaser¹,

Lustig²,

Xiaolan

2019

The Journal of Finance

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“…Economic growth is a result, as firms are continually able to upgrade their technology by imitating other, better firms in the economy. Thus, this is a model of how endogenous technology diffusion contributes to growth-abstracting away from how innovation expands the technology frontier (see Benhabib, Perla, and Tonetti (2019)).…”

Section: Introductionmentioning

confidence: 99%

Equilibrium Technology Diffusion, Trade, and Growth

Perla

Tonetti

Waugh

2015

Self Cite

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We study how opening to trade affects economic growth in a model where heterogeneous firms can choose to adopt a new technology already in use by other firms. We characterize the growth rate using summary statistics of the profit distribution-the ratio of profits between the average and marginal adopting firm. Opening to trade increases the spread in profits through increased export opportunities and foreign competition, induces more rapid technology adoption, and generates faster growth. Quantitatively, opening to trade yields large increases in growth, but welfare effects are muted due to loss of variety and reallocation of labor away from production.

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“… See König, Lorenz, and Zilibotti () and Benhabib, Perla, and Tonetti () for models in which individuals can choose either to imitate or to innovate. …”

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confidence: 99%

The Global Diffusion of Ideas

Buera

Oberfield

2020

ECTA

126

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We provide a tractable, quantitatively-oriented theory of innovation and technology diffusion to explore the role of international trade in the process of development. We model innovation and diffusion as a process involving the combination of new ideas with insights from other industries or countries. We provide conditions under which each country's equilibrium frontier of knowledge converges to a Fréchet distribution, and derive a system of differential equations describing the evolution of the scale parameters of these distributions, that is, countries' stocks of knowledge. The model remains tractable with many asymmetric countries and generates a rich set of predictions about how the level and composition of trade affect countries' frontiers of knowledge. We use the framework to quantify the contribution of bilateral trade costs to long-run changes in TFP and individual post-war growth miracles. For our preferred calibration, we find that both gains from trade and the fraction of variation of TFP growth accounted for by changes in trade more than double relative to a model without diffusion. ECONOMIC MIRACLES are characterized by protracted growth of per-capita income and productivity as well as increases in trade flows. The experiences of South Korea in the postwar period and the recent performance of China are prominent examples. These experiences suggest an important role played by openness in the process of development. 1Yet quantitative trade models relying on standard static mechanisms imply relatively small gains from openness and, therefore, cannot account for growth miracles. 2 These findings call for alternative channels through which openness can affect development. In this paper, we present and analyze a tractable, quantitatively-oriented model of an alternative suggested a strong relationship between openness and growth, although Rodriguez and Rodrik (2001) subsequently argued that many estimates in the literature suffered from econometric issues including omitted variables, endogeneity, and lack of robustness. More recent contributions to the literature have developed strategies to overcome some of these issues. To estimate the impact of trade on growth, Feyrer (2009a,b) studied the natural experiments of the decade-long closing of the Suez Canal in the 1970s and the long run decline in the cost of shipping goods by air, each of which had larger impacts on some pairs of countries than others, and Pascali (2017) studied the introduction of the steamship which affected some trade routes more than others. See also Lucas (2009b) and Wacziarg and Welch (2008), and Donaldson (2015) for reviews of the literature.2 See Connolly and Yi (2015) for a quantification of the role of trade on Korean's growth miracle. Atkeson and Burstein (2010) also found relatively small effects in a model with innovation.

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

Cited by 50 publications

References 17 publications

Capital Share Dynamics When Firms Insure Workers

Capital Share Dynamics When Firms Insure Workers

Equilibrium Technology Diffusion, Trade, and Growth

The Global Diffusion of Ideas

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