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Profitability, productivity and growth

Abstract:

Recent empirical evidence suggests that firm selection and growth are largely demand-driven. We incorporate this feature into a model of endogenous growth in which heterogeneous firms innovate and survive based on profitability, rather than productivity alone. We show analytically that firm-level demand variation impacts aggregate growth by changing firms’ incentives to innovate. Estimating our model on U.S. Census firm data, we quantify that 20% of aggregate growth is demand-driven an...

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Publication status:
Published

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Institution:
University of Oxford
Division:
SSD
Department:
Economics
Oxford college:
Christ Church
Role:
Author
Publisher:
University of Oxford Publisher's website
Article number:
937
Series:
Department of Economics Discussion Paper Series
Publication date:
2021-05-28
Paper number:
937
Language:
English
Pubs id:
1179894
Local pid:
pubs:1179894
Deposit date:
2021-06-01

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