Innovation and imitation
Jess Benhabib, \'Eric Brunet, Mildred Hager

TL;DR
This paper models growth driven by innovation and imitation among firms, analyzing how these processes influence productivity distributions, firm dynamics, and economic growth through various theoretical models.
Contribution
It introduces models combining innovation and imitation to explain balanced growth paths and productivity distributions with novel insights into firm dynamics.
Findings
Balanced growth paths with truncated power-law productivity distributions.
Imitation and innovation cause fluctuations in productivity frontiers.
Firm numbers and productivity support can fluctuate due to stochastic imitation.
Abstract
We study several models of growth driven by innovation and imitation by a continuum of firms, focusing on the interaction between the two. We first investigate a model on a technology ladder where innovation and imitation combine to generate a balanced growth path (BGP) with compact support, and with productivity distributions for firms that are truncated power-laws. We start with a simple model where firms can adopt technologies of other firms with higher productivities according to exogenous probabilities. We then study the case where the adoption probabilities depend on the probability distribution of productivities at each time. We finally consider models with a finite number of firms, which by construction have firm productivity distributions with bounded support. Stochastic imitation and innovation can make the distance of the productivity frontier to the lowest productivity level…
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Taxonomy
TopicsEconomic Growth and Productivity · Economic theories and models · Firm Innovation and Growth
