Optimal planning of technological options and productivity distribution dynamics

How does the distribution of productivity levels between firms change over time? What are the drivers of imitation and innovation? How much will production units invest in research and/or technology adoption? These are some of the questions often addressed by economists to enhance our understanding about technological progress and economic growth. This study contributes to the literature by examining the dynamics of an intertemporal utility maximization model in which agents’ choices on whether to innovate or imitate are endogenous. These choices determine the evolution, and systematic repositioning, of the distribution of productivity. Under plausible assumptions, the setup is flexible enough to allow for compression or expansion of the distribution (i.e., for convergence or divergence between technological capabilities). The normative implication is that the dynamics of productivity distribution is not the inevitable outcome of optimal decentralized choices in an uncontrollable environment. Instead, there are conditioning factors that public authorities can leverage (e.g., through patent policies) to achieve desired social goals (i.e., to improve welfare).