NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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From Imitation to Innovation: Where Is all that Chinese R&D Going?

Michael König, Zheng Michael Song, Kjetil Storesletten, Fabrizio Zilibotti

NBER Working Paper No. 27404
Issued in June 2020
NBER Program(s):Economic Fluctuations and Growth

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.

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Document Object Identifier (DOI): 10.3386/w27404

 
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