The paper by Acemoglu, Aghion, and Zilibotti examines the relationship between an economy's distance to the technological frontier, selection mechanisms, and economic growth. They argue that as an economy approaches the world technology frontier, the importance of selection mechanisms, particularly in innovation, increases. Initially, economies at early stages of development rely on an investment-based strategy, which maximizes investment but sacrifices selection. As the economy gets closer to the frontier, it switches to an innovation-based strategy, focusing on short-term relationships, younger firms, and better selection of entrepreneurs and firms. The authors suggest that policies encouraging the investment-based strategy, such as investment subsidies or limits on product market competition, may initially boost growth but can lead to long-run costs, including a "non-convergence trap" where the economy fails to converge to the frontier. They also explore the political economy of government intervention, noting that policies favoring the investment-based strategy can create a powerful constituency that resists switching to more growth-enhancing policies. The paper uses a simple endogenous growth model to support these arguments and provides empirical evidence from historical and cross-country data.The paper by Acemoglu, Aghion, and Zilibotti examines the relationship between an economy's distance to the technological frontier, selection mechanisms, and economic growth. They argue that as an economy approaches the world technology frontier, the importance of selection mechanisms, particularly in innovation, increases. Initially, economies at early stages of development rely on an investment-based strategy, which maximizes investment but sacrifices selection. As the economy gets closer to the frontier, it switches to an innovation-based strategy, focusing on short-term relationships, younger firms, and better selection of entrepreneurs and firms. The authors suggest that policies encouraging the investment-based strategy, such as investment subsidies or limits on product market competition, may initially boost growth but can lead to long-run costs, including a "non-convergence trap" where the economy fails to converge to the frontier. They also explore the political economy of government intervention, noting that policies favoring the investment-based strategy can create a powerful constituency that resists switching to more growth-enhancing policies. The paper uses a simple endogenous growth model to support these arguments and provides empirical evidence from historical and cross-country data.