Advanced Search
MyIDEAS: Login

Equilibrium Bias of Technology

Contents:

Author Info

  • Daron Acemoglu

Abstract

This paper presents three sets of results about equilibrium bias of technology. First, I show that when the menu of technological possibilities only allows for factor-augmenting technologies, the increase in the supply of a factor induces technological change relatively biased toward that factor-meaning that the induced technological change increases the relative marginal product of the factor becoming more abundant. Moreover, this induced bias can be strong enough to make the relative marginal product of a factor increasing in response to an increase in its supply, thus leading to an upward-sloping relative demand curve. I also show that these results about relative bias do not generalize when more general menus of technological possibilities are considered. Second, I prove that under mild assumptions, the increase in the supply of a factor induces technological change that is absolutely biased toward that factor-meaning that it increases its marginal product at given factor proportions. The third and most important result in the paper establishes the possibility of and conditions for strong absolute equilibrium bias-whereby the price (marginal product) of a factor increases in response to an increase in its supply. I prove that, under some regularity conditions, there will be strong absolute equilibrium bias if and only if the aggregate production function of the economy fails to be jointly concave in factors and technology. This type of failure of joint concavity is possible in economies where equilibrium factor demands and technologies result from the decisions of different agents. Copyright The Econometric Society 2007.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1111/j.1468-0262.2007.00797.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 75 (2007)
Issue (Month): 5 (09)
Pages: 1371-1409

as in new window
Handle: RePEc:ecm:emetrp:v:75:y:2007:i:5:p:1371-1409

Contact details of provider:
Phone: 1 212 998 3820
Fax: 1 212 995 4487
Email:
Web page: http://www.econometricsociety.org/
More information through EDIRC

Order Information:
Email:
Web: http://www.blackwellpublishing.com/memb.asp?ref=0012-9682

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
  3. Reinganum, Jennifer R., . "Innovation and Industry Evolution," Working Papers 426, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
  5. Caselli, Francesco & Coleman II, Wilbur John, 2000. "The World Technology Frontier," CEPR Discussion Papers 2584, C.E.P.R. Discussion Papers.
  6. Paul Milgrom & John Roberts, . "The LeChatelier Principle," Working Papers 95007, Stanford University, Department of Economics.
  7. Acemoglu, Daron & Zilibotti, Fabrizio, 1998. "Productivity Differences," Seminar Papers 660, Stockholm University, Institute for International Economic Studies.
  8. Thoenig, Mathias & Verdier, Thierry, 2002. "A Theory of Defensive Skill-based Innovation and Globalization," CEPR Discussion Papers 3416, C.E.P.R. Discussion Papers.
  9. Stokey, Nancy L, 1995. "R&D and Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 62(3), pages 469-89, July.
  10. Bénabou, Roland, 2004. "Inequality, Technology and the Social Contract," CEPR Discussion Papers 4741, C.E.P.R. Discussion Papers.
  11. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  12. Grossman, Gene M & Shapiro, Carl, 1987. "Dynamic R&D Competition," Economic Journal, Royal Economic Society, vol. 97(386), pages 372-87, June.
  13. Young, Alwyn, 1993. "Invention and Bounded Learning by Doing," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 443-72, June.
  14. Michele Boldrin & David K Levine, 2006. "Perfectly Competitive Innovation," Levine's Working Paper Archive 618897000000000954, David K. Levine.
  15. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  16. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers 1707, C.E.P.R. Discussion Papers.
  17. Duranton, Gilles, 2004. "The economics of production systems: Segmentation and skill-biased change," European Economic Review, Elsevier, vol. 48(2), pages 307-336, April.
  18. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed The Labor Market?," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1169-1213, November.
  19. Nancy L. Stokey, 1990. "Human Capital, Product Quality, And Growth," NBER Working Papers 3413, National Bureau of Economic Research, Inc.
  20. Gino Gancia, 2004. "Globalization, Divergence and Stagnation," 2004 Meeting Papers 63, Society for Economic Dynamics.
  21. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
  22. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-28, June.
  23. Nordhaus, William D, 1973. "Some Skeptical Thoughts on the Theory of Induced Innovation," The Quarterly Journal of Economics, MIT Press, vol. 87(2), pages 208-19, May.
  24. Amir, R., 1991. "Sensitivity analysis of multi-sector optimal economic dynamics," CORE Discussion Papers 1991006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  25. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-21, January.
  26. Paul Romer, 1991. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  27. Reinganum, Jennifer F., . "Dynamic Games of Innovation," Working Papers 287, California Institute of Technology, Division of the Humanities and Social Sciences.
  28. Xavier Ragot, 2003. "Technical Change and the Dynamics of The Division of Labor," DELTA Working Papers 2003-09, DELTA (Ecole normale supérieure).
  29. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
  30. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, 03.
  31. Partha Dasgupta & Joseph Stiglitz, 1980. "Uncertainty, Industrial Structure, and the Speed of R&D," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 1-28, Spring.
  32. Roberts, Kevin, 1999. "Rationality and the LeChatelier Principle," Journal of Economic Theory, Elsevier, vol. 87(2), pages 416-428, August.
  33. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 517-549, May.
  34. James, John A. & Skinner, Jonathan S., 1985. "The Resolution of the Labor-Scarcity Paradox," The Journal of Economic History, Cambridge University Press, vol. 45(03), pages 513-540, September.
  35. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 199-230, 04.
  36. Emmanuel M. Drandakis & Edmond S. Phelps, 1965. "A Model of Induced Invention, Growth and Distribution," Cowles Foundation Discussion Papers 186, Cowles Foundation for Research in Economics, Yale University.
  37. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321.
  38. Kiley, Michael T, 1999. "The Supply of Skilled Labour and Skill-Biased Technological Progress," Economic Journal, Royal Economic Society, vol. 109(458), pages 708-24, October.
  39. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  40. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Christophe Hemous, 2011. "The environment, the endogenous growth and the endogenous labour market," Post-Print dumas-00649164, HAL.
  2. Oliveira Martins, Joaquim & De Macedo, Jorge Braga, 2008. "Growth, Reform Indicators and Policy Complementarities," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/7960, Université Paris-Dauphine.
  3. Shiyuan Pan & Heng-fu Zou & Tailong Li, 2010. "Directed Technological Change: A Knowledge-Based Model," CEMA Working Papers 391, China Economics and Management Academy, Central University of Finance and Economics.
  4. Daron Acemoglu, 2010. "When Does Labor Scarcity Encourage Innovation?," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1037 - 1078.
  5. Corrado Maria & Edwin Werf, 2008. "Carbon leakage revisited: unilateral climate policy with directed technical change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(2), pages 55-74, February.
  6. Joan Canton & Ariane Labat & Anton Roodhuijzen, 2010. "An indicator-based assessment framework to identify country-specific challenges towards greener grow," European Economy - Economic Papers 401, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  7. Amigues, Jean-Pierre & Moreaux, Michel, 2008. "Dedicated Technical Progress with a Non-renewable Resource: Efficiency and Optimality," IDEI Working Papers 497, Institut d'Économie Industrielle (IDEI), Toulouse.
  8. Acemoglu, Daron & Jensen, Martin Kaae, 2009. "Aggregate Comparative Statics," CEPR Discussion Papers 7254, C.E.P.R. Discussion Papers.
  9. Paolo Epifani & Gino Gancia, 2004. "Increasing returns, imperfect competition and factor prices," Economics Working Papers 953, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2005.
  10. E. et al. Saltari, 2011. "The impact of ICT on the Italian productivity dynamics," Working Papers 149, University of Rome La Sapienza, Department of Public Economics.
  11. Jin, Hui & Jorgenson, Dale W., 2010. "Econometric modeling of technical change," Journal of Econometrics, Elsevier, vol. 157(2), pages 205-219, August.
  12. Maciej K. Dudek & ówna Handlowa, 2006. "On Artificial Structural Unemployment," Computing in Economics and Finance 2006 171, Society for Computational Economics.
  13. Mark Sanders, 2007. "Scientific Paradigms, Entrepreneurial Opportunities and Cycles in Economic Growth," Small Business Economics, Springer, vol. 28(4), pages 339-354, April.
  14. Werner Roeger & Janos Varga & Jan in 't Veld, 2010. "How to close the productivity gap between the US and Europe: A quantitative assessment using a semi-endogenous growth model," European Economy - Economic Papers 399, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ecm:emetrp:v:75:y:2007:i:5:p:1371-1409

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.