Working Paper: NBER ID: w25321
Authors: Andrew Atkeson; Ariel Burstein; Manolis Chatzikonstantinou
Abstract: What quantitative lessons can we learn from models of endogenous technical change through innovative investments by firms for the impact of changes in the economic environment on the dynamics of aggregate productivity in the short, medium, and long run? We present a unifying model that nests a number of canonical models in the literature and characterize their positive implications for the transitional dynamics of aggregate productivity and their welfare implications in terms of two sufficient statistics. We review the current state of measurement of these two sufficient statistics and discuss the range of positive and normative quantitative implications of our model for a wide array of counterfactual experiments, including the link between a decline in the entry rate of new firms and a slowdown in the growth of aggregate productivity given that measurement. We conclude with a summary of the lessons learned from our analysis to help direct future research aimed at building models of endogenous productivity growth useful for quantitative analysis.
Keywords: aggregate productivity; innovative investment; endogenous technical change
JEL Codes: O30; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Changes in the economic environment (F69) | Equilibrium relationship between transitional dynamics of aggregate productivity and innovative investment (O49) |
| Decline in the entry rate of new firms (L26) | Cumulative decline in aggregate productivity (O49) |
| Changes in research labor (J29) | Productivity growth (O49) |
| Research technology parameters (C90) | Aggregate productivity responses to policy changes (E23) |
| Intertemporal knowledge spillovers (O36) | Aggregate productivity dynamics (E23) |