Abstract: We propose a model of endogenous economic growth with “weak” scale effects and diminishing returns to innovation at the micro level. In our model, entrants introduce new technologies through research and incumbents incrementally improve them through development. Over time, further improvement becomes harder such that firms ultimately run out of ideas and exit, paving the way for entrants that discover new technologies with further room for improvement. This turnover gives rise to a continuous stream of (temporary) opportunities for technological improvements that sustain economic growth. In a stationary equilibrium, the long-run growth rate is constant and endogenous to market incentives.

Abstract: Women made up only 15% of U.S. inventors in 2024. Assuming no intrinsic gender differences in inventive potential, the scarcity of women in research reveals that the U.S. is missing out on some of its brightest minds. How costly is this talent misallocation for aggregate productivity? I develop a model of semi-endogenous growth in which individuals with heterogeneous talent choose between research and production careers. However, several barriers deter women from pursuing their comparative advantage. Lifting those barriers would increase U.S. income per person by 14.1% in the long run, compared with just 1.5% from a 30% R&D subsidy alone.

Abstract: We construct a measure of consumption-equivalent welfare for Black and White Americans, which incorporates life expectancy, consumption, leisure, and inequality. Based on these factors, welfare for Black Americans was 40 percent of that for White Americans in 1984 and 59 percent by 2022. There has been remarkable progress for Black Americans: The level of their consumption-equivalent welfare increased by a factor of 3.5 over the last 38 years when aggregate consumption per person only doubled. Despite this progress, the welfare gap in 2022 remains disconcertingly large at 41 percent, much larger than the 16 percent gap in consumption per person.

Abstract: Assumptions about demand influence the positive and normative implications of growth models. In light of the growing evidence of variable markups and positive yet incomplete pass-throughs, we develop an endogenous growth model with a Kimball (1995) demand system. It features differentiated firms engaging in monopolistic competition and making forward-looking investments in R&D to improve their process efficiency. The model succeeds in matching the evidence on markups and pass-throughs by featuring a lower elasticity of demand at lower prices. A novel implication of our model is that market power does not only distort the overall level of innovation, but also the cross-firm allocation of R&D resources. Using firm-level administrative data from France to discipline our model, we find that this R&D misallocation slows down aggregate growth by 0.92 percentage points.

Abstract: This paper examines the impact of land market liberalization on the productivity and growth of manufacturing firms in India, using the staggered repeal of India’s Urban Land Ceiling and Regulation Act (ULCRA) as a natural experiment. The ULCRA imposed ceilings on landholdings and restricted land transfers, potentially leading to land misallocation and hindering creative destruction. We find that the repeal of the ULCRA reduced land misallocation by allowing previously more productive firms to increase their land use by 17%. As a result, treated firms expanded their production capacity and became more productive. The liberalization also influenced firm dynamics. Following the repeal, treated firms exhibited a 15% increase in product turnover, introducing more new products and phasing out old ones. Moreover, the liberalization improved firm selection by facilitating the exit of unprofitable firms and attracting more innovative entrants. Using a dynamic innovation model with land market frictions, we find a 2.7% increase in aggregate productivity due to reduced land misallocation and a 14-basis-point rise in the growth rate, resulting in a 5% improvement in consumption-equivalent welfare. These findings underscore the importance of considering both the static and dynamic impacts of land market regulations.