Document Type
Discussion Paper
Publication Date
6-15-2020
CFDP Number
2237
CFDP Pages
47
Journal of Economic Literature (JEL) Code(s)
O31, O33, O47
Abstract
We construct a model of rm dynamics with heterogenous productivity and distortions. The productivity distribution evolves endogenously as the result of the decisions of firms seeking to upgrade their productivity over time. Firms can adopt two strategies toward that end: imitation and innovation. The theory bears predictions about the evolution of the productivity distribution. We structurally estimate the stationary state of the dynamic model targeting moments of the empirical distribution of R&D and TFP growth in China during the period 2007-2012. The estimated model ts the Chinese data well. We compare the estimates with those obtained using data for Taiwan and find the results to be robust. We perform counterfactuals to study the effect of alternative policies. We find large effects of R&D misallocation on long-run growth.
Recommended Citation
König, König D.; Storesletten, Kjetil; Song, Zheng; and Zilibotti, Fabrizio, "From Imitation to Innovation: Where Is All That Chinese R&D Going?" (2020). Cowles Foundation Discussion Papers. 1.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1