Innovation, Reallocation, and Growth
Name
aer.20130470.pdf
Description
Published version
Size
854.78 KB
Format
Adobe PDF
Checksum (MD5)
4f02256e6071826aee453de6daf55c2a
Author(s)
Acemoglu, K. Daron
Akcigit, Ufuk
Alp, Harun
Bloom, Nicholas
Kerr, William
Date Issued
November 2018
Journal
American Economic Review
Publisher
American Economic Association
Citation
Acemoglu, Daron et al., "Innovation, Reallocation, and Growth." American Economic Review 108, 11 (November 2018): 3450-91 ©2018 Authors
Version
Final published version
Abstract
We build a model of firm-level innovation, productivity growth, and reallocation featuring endogenous entry and exit. A new and central economic force is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using US Census microdata on firm-level output, R&D, and patenting. The model provides a good fit to the dynamics of firm entry and exit, output, and R&D. Taxing the continued operation of incumbents can lead to sizable gains (of the order of 1.4 percent improvement in welfare) by encouraging exit of less productive firms and freeing up skilled labor to be used for R&D by high-type incumbents. Subsidies to the R&D of incumbents do not achieve this objective because they encourage the survival and expansion of low-type firms.
MIT Department
Massachusetts Institute of Technology. Department of Economics
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/AER.20130470
