NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Reconciling Models of Diffusion and Innovation: A Theory of the Productivity Distribution and Technology Frontier

Jess Benhabib, Jesse Perla, Christopher Tonetti

NBER Working Paper No. 23095
Issued in January 2017
NBER Program(s):Economic Fluctuations and Growth, Productivity, Innovation, and Entrepreneurship

We study how innovation and technology diffusion interact to endogenously determine the productivity distribution and generate aggregate growth. We model firms that choose to innovate, adopt technology, or produce with their existing technology. Costly adoption creates a spread between the best and worst technologies concurrently used to produce similar goods. The balance of adoption and innovation determines the shape of the distribution; innovation stretches the distribution, while adoption compresses it. Whether and how innovation and diffusion contribute to aggregate growth depends on the support of the productivity distribution. With finite support, the aggregate growth rate cannot exceed the maximum growth rate of innovators. Infinite support allows for “latent growth”: extra growth from initial conditions or auxiliary stochastic processes. While innovation drives long-run growth, changes in the adoption process can influence growth by affecting innovation incentives, either directly, through licensing excludable technologies, or indirectly, via the option value of adoption.

download in pdf format
   (947 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23095

Users who downloaded this paper also downloaded* these:
Gompers and Calder-Wang w23082 Diversity in Innovation
Akcigit, Grigsby, and Nicholas w23047 The Rise of American Ingenuity: Innovation and Inventors of the Golden Age
Gans and Stern w23138 Endogenous Appropriability
Acemoglu, Akcigit, and Kerr w22783 Innovation Network
Autor, Dorn, Hanson, Pisano, and Shu w22879 Foreign Competition and Domestic Innovation: Evidence from U.S. Patents
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us