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The Growth Dynamics of Innovation, Diffusion, and the Technology Frontier

Author

Listed:
  • Jesse Perla

    (University of British Columbia)

  • Christopher Tonetti

    (Stanford GSB)

  • Jess Benhabib

    (NYU)

Abstract

Perla and Tonetti (2014) and Lucas and Moll (2014) study technology diffusion in isolation, in environments without the generation of new ideas. Without new ideas, growth cannot continue forever if there is a finite technology frontier. This paper examines, in an economy in which firms choose to innovate, adopt technology, or keep producing with their existing technology, how innovation and diffusion interact to endogenously determine the productivity distribution with a finite, but expanding, frontier. There is a tension in the determination of the productivity distribution - innovation tends to stretch the distribution, while diffusion compresses it. Finally, we analyze the degree to which innovation and technology diffusion at the firm level contribute to aggregate economic growth.

Suggested Citation

  • Jesse Perla & Christopher Tonetti & Jess Benhabib, 2014. "The Growth Dynamics of Innovation, Diffusion, and the Technology Frontier," 2014 Meeting Papers 818, Society for Economic Dynamics.
    • Handle: RePEc:red:sed014:818
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    Cited by:

    1. Da-Rocha, José-María & Restuccia, Diego & Tavares, Marina M., 2023. "Policy distortions and aggregate productivity with endogenous establishment-level productivity," European Economic Review, Elsevier, vol. 155(C).
    2. Jesse Perla & Christopher Tonetti & Michael E. Waugh, 2021. "Equilibrium Technology Diffusion, Trade, and Growth," American Economic Review, American Economic Association, vol. 111(1), pages 73-128, January.
    3. Andrea Mantovi, 2016. "Stochastic and path dependence effects in the diffusion of ideas," Working Paper series 16-12, Rimini Centre for Economic Analysis.
    4. Barney Hartman‐Glaser & Hanno Lustig & Mindy Z. Xiaolan, 2019. "Capital Share Dynamics When Firms Insure Workers," Journal of Finance, American Finance Association, vol. 74(4), pages 1707-1751, August.
    5. Francisco J. Buera & Ezra Oberfield, 2020. "The Global Diffusion of Ideas," Econometrica, Econometric Society, vol. 88(1), pages 83-114, January.
    6. , & Lorenz, Jan & ,, 2016. "Innovation vs. imitation and the evolution of productivity distributions," Theoretical Economics, Econometric Society, vol. 11(3), September.

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