The Diffusion of Knowledge

Paper Session

Friday, Jan. 6, 2017 1:00 PM – 3:00 PM

Hyatt Regency Chicago, Burnham
Hosted By: Econometric Society
  • Chair: Christopher Tonetti, Stanford University

Clans, Guilds, and Markets: Apprenticeship Institutions and Growth in the Pre-Industrial Economy

Matthias Doepke
Northwestern University
David de la Croix
University Catholic Louvain
Joel Mokyr
Northwestern University


In the centuries leading up to the Industrial Revolution, Western Europe gradually pulled ahead of other world regions in terms of technological creativity, population growth, and income per capita. We argue that superior institutions for the creation and dissemination of productive knowledge help explain the European advantage. We build a model of technological progress in a pre-industrial economy that emphasizes the person-to-person transmission of tacit knowledge. The young learn as apprentices from the old. Institutions such as the family, the clan, the guild, and the market organize who learns from whom. We argue that medieval European institutions such as guilds, and specific features such as journeymanship, can explain the rise of Europe relative to regions that relied on the transmission of knowledge within extended families or clans.

An Assignment Model of Knowledge Diffusion and Income Inequality

Erzo G.J. Luttmer
University of Minnesota


Randomness in individual discovery disperses productivities, whereas learning from others keeps productivities together. Long-run growth and persistent earnings inequality emerge when these two mechanisms for knowledge accumulation are combined. This paper considers an economy in which those with more useful knowledge can teach others, with competitive markets assigning students to teachers. In equilibrium, students with an ability to learn quickly are assigned to teachers with the most productive knowledge. This sorting on ability implies large differences in earnings distributions conditional on ability, as shown using explicit formulas for the tail behavior of these distributions.

Reconciling Models of Diffusion and Innovation: A Theory of the Productivity Distribution and Technology Frontier

Jess Benhabib
New York University
Jesse Perla
University of British Columbia
Christopher Tonetti
Stanford University


We study how innovation and technology diusion interact to endogenously determine the productivity
distribution and generate aggregate growth. We develop a model in which rms choose
to innovate, adopt technology, or keep producing with their existing technology. We show how
innovation tends to stretch the distribution while adoption compresses it. These forces can balance,
generating stationary distributions, with the relative strength of the forces determining the
shape of the distribution. We analyze the degree to which innovation and technology diusion at
the rm level contribute to aggregate economic growth and can lead to hysteresis, which depends
crucially on the cardinality of the support of the productivity distribution. With nite support
productivity distributions, the aggregate growth rate equals the growth rate of innovators at the
frontier. Changes in the costs or benets of adoption, however, can in
uence the aggregate growth
rate by aecting the incentives to innovate, either directly through licensing arrangements when
technologies are excludable or indirectly via the option value of adoption.
Ezra Oberfield
Princeton University
Francisco Buera
Federal Reserve Bank of Chicago
Thomas Holmes
University of Minnesota
JEL Classifications
  • A1 - General Economics