Innovation, Reallocation and Growth

We thank four anonymous referees and the coeditor, Marty Eichenbaum, for detailed suggestions. We also thank participants in Kuznetz Lecture at Yale University and in seminars at New York University, Federal Reserve Bank of Minneapolis, North Carolina State University, Bank of Finland, University of Pennsylvania, University of Toronto Growth and Development Conference, AEA 2011 and 2012, NBER Summer Institute Growth Meeting 2012, CREI-MOVE Workshop on Misallocation and Productivity, Federal Reserve Bank of Philadelphia, and Microsoft for helpful comments. This research is supported by Harvard Business School, Innovation Policy and the Economy forum, Kauffman Foundation, National Science Foundation, and University of Pennsylvania. Douglas Hanley provided excellent research assistance in all parts of this project. The research in this paper was conducted while the authors were Special Sworn Status researchers of the US Census Bureau at the Boston Census Research Data Center (BRDC). Support for this research from NSF grant ITR-0427889 [BRDC] is gratefully acknowledged. Research results and conclusions expressed are the authors’ and do not necessarily reflect the views of the Census Bureau or NSF. This paper has been screened to ensure that no confidential data are revealed. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

• April 25, 2013