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Publications
Publications
  • Summer, 2018
  • Article
  • American Economic Review

Innovation, Reallocation and Growth

By: Daron Acemoglu, Ufuk Akcigit, Harun Alp, Nicholas Bloom and William R. Kerr
  • Format:Print
  • | Pages:42
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Abstract

We build a model of firm-level innovation, productivity growth, and reallocation featuring endogenous entry and exit. A new and central economic force is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using U.S. Census microdata on firm-level output, R&D, and patenting. The model provides a good fit to the dynamics of firm entry and exit, output, and R&D. Taxing the continued operation of incumbents can lead to sizable gains (of the order of 1.4% improvement in welfare) by encouraging exit of less productive firms and freeing up skilled labor to be used for R&D by high-type incumbents. Subsidies to the R&D of incumbents do not achieve this objective because they encourage the survival and expansion of low-type firms.

Keywords

Entry; Growth; Industrial Policy; Innovation; R&D; Reallocation; Selection; Market Entry and Exit; Growth and Development; Innovation and Invention; Research and Development; Performance Productivity

Citation

Acemoglu, Daron, Ufuk Akcigit, Harun Alp, Nicholas Bloom, and William R. Kerr. "Innovation, Reallocation and Growth." American Economic Review 108, no. 11 (November 2018): 3450–3491.
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About The Author

William R. Kerr

Entrepreneurial Management
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More from the Authors
  • When Scenario Planning Fails By: Kalle Heikkinen, William R. Kerr, Mika Malin, Panu Routila and Eemil Rupponen
  • Independent Governance of Meta’s Social Spaces: The Oversight Board By: Jesse M. Shapiro, Natalia Rigol, Benjamin N. Roth and William R. Kerr
  • Migration Fear and Minority Crowd-Funding Success: Evidence from Kickstarter By: John (Jianqui) Bai, William R. Kerr, Chi Wan and Alptug Yorulmaz
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