The Dynamics of Development : Innovation and Reallocation
This paper proposes a quantitative model of endogenous firm dynamics to study growth acceleration episodes triggered by reforms. It finds that reversals of entry distortions lead to persistent growth in TFP and declining average firm size, as in the experience of successful post-communist transi...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/273571530327069374/The-dynamics-of-development-innovation-and-reallocation http://hdl.handle.net/10986/29978 |
| Summary: | This paper proposes a quantitative model of endogenous
firm dynamics to study growth acceleration episodes triggered
by reforms. It finds that reversals of entry distortions
lead to persistent growth in TFP and declining average firm
size, as in the experience of successful post-communist transitions.
Removing idiosyncratic distortions results in a more
protracted path of TFP and a rising average firm size, as
in non-communist growth accelerations. When calibrating
the reforms to China’s liberalization, the model accounts for
one-third of the observed growth in TFP, while matching
the dynamics of average firm size and income inequality.. |
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