Firm Learning and Growth

Costas Arkolakis, Theodore Papageorgiou and Olga Timoshenko

Review of Economic Dynamics, 2018, vol. 27, 146-168

Abstract: We study the implications of introducing learning (Jovanovic, 1982) in a standard monopolistically competitive environment with firm productivity heterogeneity. Our setup predicts that firm growth rates decrease with age, holding size constant, and decrease with size, holding age constant, a fact that models focusing on idiosyncratic productivity shocks have difficulty matching. We characterize the planner's problem and show that relative quantities between any two firms are the same in both planner's allocation and the decentralized economy. As a result, any inefficiency is driven by a discrepancy in the firm entry and exit thresholds. We calibrate the model using Colombian plant-level data and demonstrate how policies directly affecting firm entry and exit can be welfare enhancing. In particular, age-dependent subsidies allow young firms to avoid early exit and thus benefit consumers through access to a larger number of varieties. (Copyright: Elsevier)

Keywords: Learning; Firm Growth; Firm Subsidies; Welfare (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (83)

Downloads: (external link)
https://dx.doi.org/10.1016/j.red.2017.06.001
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See https://www.sciencedirect.com/ for details.

Related works:
Software Item: Code and data files for "Firm Learning and Growth" (2017)
Working Paper: Firm Learning and Growth (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:issued:15-260

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2017.06.001

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().