American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Technological Diversification
American Economic Review
vol. 103,
no. 1, February 2013
(pp. 378–414)
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 variety-specific 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. (JEL D21, D24, E23, O33, O47)Citation
Koren, Miklós, and Silvana Tenreyro. 2013. "Technological Diversification." American Economic Review, 103 (1): 378–414. DOI: 10.1257/aer.103.1.378Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- E23 Macroeconomics: Production
- O33 Technological Change: Choices and Consequences; Diffusion Processes
- O47 Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence