An Empirical Model of Growth Through Product Innovation

45 Pages Posted: 8 Aug 2005

See all articles by Rasmus Lentz

Rasmus Lentz

Boston University - Department of Economics; University of Copenhagen - Centre for Applied Microeconometrics

Dale T. Mortensen

Northwestern University - Department of Economics; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 2005

Abstract

Productivity dispersion across firms is large and persistent, and worker reallocation among firms is an important source of productivity growth. The purpose of the paper is to estimate the structure of an equilibrium model of growth through innovation that explains these facts. The model is a modified version of the Schumpeterian theory of firm evolution and growth developed by Klette and Kortum (2004). The data set is a panel of Danish firms than includes information on value added, employment, and wages. The model's fit is good and the structural parameter estimates have interesting implications for the aggregate growth rate and the contribution of worker reallocation to it.

Keywords: labor productivity growth, worker reallocation, firm dynamics, firm panel data estimation

JEL Classification: E22, E24, J23, J24, L11, L25, O3, O4

Suggested Citation

Lentz, Rasmus and Mortensen, Dale T., An Empirical Model of Growth Through Product Innovation (July 2005). IZA Discussion Paper No. 1685, Available at SSRN: https://ssrn.com/abstract=773946

Rasmus Lentz

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-6324 (Phone)

University of Copenhagen - Centre for Applied Microeconometrics

University of Copenhagen, Building 26
Øster Farimagsgade 5
Copenhagen K., DK-1353
Denmark

Dale T. Mortensen (Contact Author)

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States
847-491-8230 (Phone)
847-491-7001 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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