Transitional Dynamics in Aggregate Models of Innovative Investment

Posted: 4 Sep 2019

See all articles by Andrew Atkeson

Andrew Atkeson

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

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: August 2019

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 several canonical models in the literature and characterize both 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. 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 that are useful for quantitative analysis.

Suggested Citation

Atkeson, Andrew and Burstein, Ariel T. and Chatzikonstantinou, Emmanouil, Transitional Dynamics in Aggregate Models of Innovative Investment (August 2019). Annual Review of Economics, Vol. 11, pp. 273-301, 2019. Available at SSRN: https://ssrn.com/abstract=3445879 or http://dx.doi.org/10.1146/annurev-economics-080218-025523

Andrew Atkeson (Contact Author)

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

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

Ariel T. Burstein

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

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

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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