Working Paper: CEPR ID: DP7486
Authors: Alain Gabler; Omar Licandro
Abstract: This paper contributes to the literature on both embodied technical progress and firm dynamics, by formulating an endogenous growth model where selection and imitation play a fundamental role in helping capital good producers to learn about the productivity of technologies embodied in new plants. By calibrating the model to some key aggregates particularly relevant for the embodied capital literature, among them the growth rate of the relative investment price, the model quantitatively replicates the main facts associated to firm dynamics, such as the entry rate and the tail index of the establishment size distribution. In line with the previous literature, it also predicts a contribution to productivity growth of embodied technical progress and selection of around 60%.
Keywords: endogenous growth; firm entry and exit; investment-specific technological change; selection and imitation
JEL Codes: B52; O3; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| selection and imitation (C52) | productivity growth (O49) |
| average productivity of incumbent plants (D24) | productivity of new plants (O47) |
| stochastic learning process (C69) | productivity of newly created plants (O41) |
| embodied technical progress (O49) | productivity growth (O49) |