Creative Destruction, Distance to Frontier, and Economic Development / Michael Peters, Fabrizio Zilibotti.

Format:

Book

Author/Creator:

Peters, Michael.

Contributor:

National Bureau of Economic Research.

Zilibotti, Fabrizio.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29333.

NBER working paper series no. w29333

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

We construct a model of creative destruction with endogenous firm dynamics. We integrate the theory into a general equilibrium multi-country model of technological convergence where countries interact via international spillovers. We derive implications for both firm dynamics and aggregate productivity dynamics. In richer economies, firms are on average larger and the best firms grow larger over time. In poorer economies, there is little creative destruction, low selection, and firms remain small. We estimate the parameters of the model using firm-level data for India and the United States. We study the effect of counterfactual policy reforms. Industrial policy that selectively targets the more productive firms can be beneficial in poor countries while being harmful in countries close to the economic frontier. The findings echo Acemoglu et al. (2006).

Notes:

Print version record

October 2021.