Transitional Dynamics in Aggregate Models of Innovative Investment

41 Pages Posted: 3 Dec 2018 Last revised: 10 Mar 2022

See all articles by Andrew Atkeson

Andrew Atkeson

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Ariel T. Burstein

University of California, Los Angeles (UCLA) - Department of Economics

Emmanouil Chatzikonstantinou

University of California, Los Angeles (UCLA) - Department of Economics

Date Written: November 2018

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.

Suggested Citation

Atkeson, Andrew G. and Burstein, Ariel T. and Chatzikonstantinou, Emmanouil, Transitional Dynamics in Aggregate Models of Innovative Investment (November 2018). NBER Working Paper No. w25321, Available at SSRN: https://ssrn.com/abstract=3294926

Andrew G. Atkeson (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ariel T. Burstein

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Bunche Hall 8365
Los Angeles, CA 90095-1477
United States
310-206-6732 (Phone)
310-825-9528 (Fax)

Emmanouil Chatzikonstantinou

University of California, Los Angeles (UCLA) - Department of Economics ( email )

8283 Bunche Hall
Los Angeles, CA 90095-1477
United States

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