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Equilibrium Imitation and Growth

21 Pages Posted: 20 Jun 2011 Last revised: 1 Sep 2013

Jesse Perla

New York University (NYU)

Christopher Tonetti

New York University (NYU)

Date Written: July 27, 2012

Abstract

The least productive agents in an economy can be vital in generating growth by spurring technology diffusion. We develop an analytically tractable model where growth is created as a positive externality from risk taking by firms at the bottom of the productivity distribution imitating more productive firms. Heterogeneous firms choose to produce or pay a cost and search within the economy to upgrade their technology. Sustained growth comes from the feedback between the endogenously determined distribution of productivity, as evolved by past search decisions, and an optimal forward looking search policy. The growth rate depends on characteristics of the productivity distribution, with a thicker tailed distribution leading to more growth.

Keywords: Endogenous Growth, Productivity Distribution, Firm Heterogeneity, Technology Diffusion, Search

JEL Classification: D92, E23, 014, O31, O33, O40

Suggested Citation

Perla, Jesse and Tonetti, Christopher, Equilibrium Imitation and Growth (July 27, 2012). Available at SSRN: https://ssrn.com/abstract=1866460 or http://dx.doi.org/10.2139/ssrn.1866460

Jesse Perla (Contact Author)

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Christopher Tonetti

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

HOME PAGE: http://www.christophertonetti.com/

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