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From Imitation to Innovation: Where Is all that Chinese R&D Going?

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  • Michael König
  • Zheng Michael Song
  • Kjetil Storesletten
  • Fabrizio Zilibotti
Abstract
We construct an endogenous growth model with random interactions where firms are subject to distortions. The TFP distribution evolves endogenously as firms seek to upgrade their technology over time either by innovating or by imitating other firms. We use the model to quantify the effects of misallocation on TFP growth in emerging economies. 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 2007–12. The estimated model fits the Chinese data well. We compare the estimates with those obtained using data for Taiwan and perform counterfactuals to study the effect of alternative policies. R&D misallocation has a large effect on TFP growth.

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  • Michael König & Zheng Michael Song & Kjetil Storesletten & Fabrizio Zilibotti, 2020. "From Imitation to Innovation: Where Is all that Chinese R&D Going?," NBER Working Papers 27404, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27404
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    2. Gomes, Orlando, 2024. "Optimal planning of technological options and productivity distribution dynamics," Economic Modelling, Elsevier, vol. 130(C).
    3. Dachs, Bernhard & Amoroso, Sara & Castellani, Davide & Papanastassiou, Marina & von Zedtwitz, Max, 2024. "The internationalisation of R&D: Past, present and future," International Business Review, Elsevier, vol. 33(1).
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    6. Liu, Qing & Qiu, Larry D. & Wei, Xing & Zhan, Chaoqun, 2024. "The (dis)connection between R&D and productivity in China: Policy implications of R&D tax credits," Journal of Comparative Economics, Elsevier, vol. 52(1), pages 297-320.
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    8. Jess Benhabib & Jesse Perla & Christopher Tonetti, 2021. "Reconciling Models of Diffusion and Innovation: A Theory of the Productivity Distribution and Technology Frontier," Econometrica, Econometric Society, vol. 89(5), pages 2261-2301, September.
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    10. Zhang, Yiran, 2021. "Quantitative Assessment on Frictions in Technology Market," MPRA Paper 109470, University Library of Munich, Germany.
    11. Orlando Gomes, 2024. "The world’s productivity distribution and optimal knowledge absorption," Economics and Business Letters, Oviedo University Press, vol. 13(2), pages 91-103.
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    15. Cheng, Hong & Fan, Hanbing & Hoshi, Takeo & Hu, Dezhuang, 2024. "State ownership, political connection, and innovation subsidies in China," Journal of the Japanese and International Economies, Elsevier, vol. 71(C).
    16. Orlando Gomes, 2024. "The emergence of chaos in productivity distribution dynamics," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 47(2), pages 565-596, December.
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    18. Zhang, Yiran, 2021. "Technology Market Frictions and Economic Development: Evidence from China," MPRA Paper 122159, University Library of Munich, Germany, revised 21 Sep 2024.
    19. Sabien Dobbelaere & Michael D. König & Andrin Spescha & Martin Wörter, 2023. "R&D Decisions and Productivity Growth: Evidence from Switzerland and the Netherlands," Tinbergen Institute Discussion Papers 23-080/VI, Tinbergen Institute.
    20. Lee Branstetter & Guangwei Li, 2024. "The Challenges of Chinese Industrial Policy," Entrepreneurship and Innovation Policy and the Economy, University of Chicago Press, vol. 3(1), pages 77-113.
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    22. Wu, Ruohan & Wang, Ning, 2024. "The mixed effects of innovation strategies and bribery on firm performance: A Re-investigation via institutional quality," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 438-462.
    23. Chen, Bochao & Wang, Hang & Wang, Xianbin, 2024. "Innovation Like China: Evidence from Chinese Local Officials' Promotions," China Economic Review, Elsevier, vol. 86(C).
    24. Xin Su & Shengwen Wang, 2024. "Impact of China’s free trade zones on the innovation performance of firms: evidence from a quasi-natural experiment," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.

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    More about this item

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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