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Technological diversification

Koren, Miklos and Tenreyro, Silvana (2013) Technological diversification. American Economic Review, 103 (1). pp. 378-414. ISSN 0002-8282

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Identification Number: 10.1257/aer.103.1.378

Abstract

Economies at early stages of development are frequently shaken by large changes in growth rates, whereas advanced economies tend to experience relatively stable growth rates. To explain this pattern, we propose a model of technological diversification. Production makes use of input-varieties that are subject to imperfectly correlated shocks. Endogenous variety adoption by firms raises average productivity and provides diversification benefits against varietyspecific shocks. Firm-level and aggregate volatility thus decline as a by-product of the development process. We quantitatively assess the model's predictions and find that it can generate patterns of volatility and development consistent with the data.

Item Type: Article
Official URL: http://www.aeaweb.org/aer/
Additional Information: © 2013 American Economic Association
Divisions: Economics
Subjects: T Technology > T Technology (General)
H Social Sciences > HB Economic Theory
JEL classification: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior
D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital and Total Factor Productivity; Capacity
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E23 - Production
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O33 - Technological Change: Choices and Consequences; Diffusion Processes
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
Sets: Departments > Economics
Collections > Economists Online
Date Deposited: 20 Feb 2013 12:39
Last Modified: 20 Jul 2019 01:43
Projects: 240852
Funders: European Central Bank, European Research Council
URI: http://eprints.lse.ac.uk/id/eprint/46865

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