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Title:Becoming obsolete: Bankruptcy through technological progress PDF Logo
Authors:Kleinert, Barbara
Issue Date:2011
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2011: Die Ordnung der Weltwirtschaft: Lektionen aus der Krise - Session: Endogenous Growth Theory A17-V3
Abstract:This paper studies product obsolescence, the entry and exit of firms, and the evolution of firm size as foundation of endogenous economic growth. I develop a dynamic general equilibrium model with heterogenous firms to analyze firm behavior in an economic environment that is characterized by a growing knowledge base. It uses a simple mechanism of knowledge diffusion that induces growth of the general knowledge base. The growing knowledge base forces small firms using the least knowledge intensive production processes to leave the economy, since competition from new entrants is tougher, since they developed their products starting from a larger knowledge base. Exiting firms are found to be smaller and less productive than survivors. Another main insight of the model is the evolution of a cohort's firm size distribution.
Subjects:economic growth
product obsolescence
firm dynamics
firm size distribution
JEL:O40
L11
O30
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2011: Die Ordnung der Weltwirtschaft - Lektionen aus der Krise

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