Distance to Frontier, Selection, and Economic Growth

By Daron Acemoglu, Philippe Aghion, Fabrizio Zilibotti. 2006

1,909 citations recorded by the source corpus.

We analyze an economy where firms undertake both innovation and adoption of technologies from the world technology frontier. The selection of high-skill managers and firms is more important for innovation than for adoption. As the economy approaches the frontier, selection becomes more important. Countries at early stages of development pursue an investment-based strategy, which relies on existing firms and managers to maximize investment but sacrifices selection. Closer to the world technology frontier, economies switch to an innovation-based strategy with short-term relationships, younger firms, less investment, and better selection of firms and managers. We show that relatively backward economies may switch out of the investment-based strategy too soon, so certain policies such as limits on product market competition or investment subsidies, which encourage the investment-based strategy, may be beneficial. However, these policies may have significant long-run costs because they make it more likely that a society will be trapped in the investment-based strategy and fail to converge to the world technology frontier. (JEL: O31, O33, O38, O40, L16)

Subfields: Economics and Econometrics, Information Systems

View Paper: https://www.semanticscholar.org/paper/861d6445ad34efefc6da29b292c276c6682c32cf

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Citations in the corpus

Technology, Information and the Decentralization of the Firm (2006, methodology): “The details are provided in Acemoglu et al. (2006).”
International Energy R&D Spillovers and the Economics of Greenhouse Gas Atmospheric Stabilization (2008, neutral): “More recently, the ideaof knowledge that trickles down from the technological frontier to the technological laggards was explored by Acemoglu et al. (2006).”
Innovation and Productivity: Evidence from Six Latin American Countries (2010, background): “5 far from the technological frontier and incentives to invest in innovation are weak or absent (Acemoglu et al., 2006).”
Undervaluation through foreign reserve accumulation: Static losses, dynamic gains (2010, background): “In particular, if the country also derives insurance benefits or political benefits from holding reserves, or if the learningby-investing externalities cease at some point, say when the economy has reached the world technology frontier (Acemoglu et al., 2006), then reserves can be repatriated withou”
Economic reforms and industrial policy in a panel of Chinese cities (2016, background): “What can we learn from the Chinese experience about the role of economic reform and industrial policy during the process of development? Existing theoretical and empirical work suggests that policies and institutions should be appropriate" to the stage of development, and particularly to the stage ”
Appropriate growth policy: a unifying framework (2006, background): “Column 2 shows that this estimate is largely unaffected by controlling for establishment-specific heterogeneity.”
Product Market Competition, Insider Trading, and Stock Market Efficiency (2010, neutral): “There is a continuum of them, indexed by l in the unit interval [0, 1].”
From Stagnation to Growth: Unified Growth Theory (2004, neutral): “Is there a scientific justification for the use of selective observations, only about the contemporary growth process, in formulating theory about the current growth process? Could we be confident about the predictions of a theory that is not based on micro foundations that are consistent with the m”
Second-Best Institutions (2008, background): “The paper by Acemoglu et al. (2006) I referred to earlier emphasizes the growth-enhancing role of such rent-sustained relationships early in the development process.”
Financial Constraints and Innovation: Why Poor Countries Don't Catch Up (2013, background): “Domestically owned firms are expected to engage more in imitation and adaptation of already created and tested technologies, rather than generating new inventions or expending resources on R&D (see Acemoglu et al. (2006) for more discussion). This is substantiated in our data where the majority (70%”