From Imitation to Innovation: Where is All that Chinese R&D Going?

47 Pages Posted: 22 Jun 2020

See all articles by Michael D. König

Michael D. König

University of Amsterdam

Zheng (Michael) Song

City University of Hong Kong (CityUHK)

Kjetil Storesletten

University of Oslo - Department of Economics; Centre for Economic Policy Research (CEPR)

Fabrizio Zilibotti

Yale University; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2020

Abstract

We construct a model of firm dynamics with heterogeneous productivity and distortions. The productivity distribution evolves endogenously as the result of the decisions of firms seeking to upgrade their productivity over time. Firms can adopt two strategies toward that end: imitation and innovation. The theory bears predictions about the evolution of the productivity distribution. We structurally estimate the stationary state of the dynamic model targeting moments of the empirical distribution of R&D and TFP growth in China during the period 2007--2012. The estimated model fits the Chinese data well. We compare the estimates with those obtained using data for Taiwan and find the results to be robust. We perform counterfactuals to study the effect of alternative policies. We find large effects of R&D misallocation on long-run growth.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

König, Michael D. and Song, Zheng (Michael) and Storesletten, Kjetil and Zilibotti, Fabrizio, From Imitation to Innovation: Where is All that Chinese R&D Going? (June 2020). NBER Working Paper No. w27404, Available at SSRN: https://ssrn.com/abstract=3632631

Michael D. König (Contact Author)

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Zheng (Michael) Song

City University of Hong Kong (CityUHK) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Kjetil Storesletten

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway
+47 2284 4009 (Phone)
+47 2285 5035 (Fax)

HOME PAGE: http://folk.uio.no/kjstore/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Fabrizio Zilibotti

Yale University ( email )

New Haven, CT 06520
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
4
Abstract Views
50
PlumX Metrics