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The importance of the embodied question revisited

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  • Boucekkine, Raouf
  • Del Rio, Fernando
  • Licandro, Omar

Abstract

In order to assess the importance of embodiment, we build up an endogenous growth model in which learning by doing is the engine of both embodied and disembodied technological progress. In sharp contrast to Phelps (1962), we show that a change in the composition of technical change affects the growth rate in the long run. We also provide an alternative explanation for the productivity slowdown: an increase in the learning efficiency of the capital goods sector, permanently lowers the growth rate of technological progress, by increasing the obsolescence costs of investment. The productivity slowdown occurs together with a rise in the rate of decline of investment goods prices. Finally, we show that an increase in the embodied fraction of technical change reduces the gap between the optimal and the desentralized growth rates.

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Bibliographic Info

Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Couverture Orange) with number 0001.

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Length: 20 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:cpm:cepmap:0001

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References

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  1. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, Elsevier, vol. 63(2), pages 346-369, August.
  2. Jeremy Greenwood & Boyan Jovanovic, 2001. "Accounting for Growth," NBER Chapters, National Bureau of Economic Research, Inc, in: New Developments in Productivity Analysis, pages 179-224 National Bureau of Economic Research, Inc.
  3. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, American Economic Association, vol. 87(3), pages 342-62, June.
  4. Martin N. Baily & Eric J. Bartelsman & John Haltiwanger, 1994. "Downsizing and productivity growth: myth or reality?," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 94-7, Board of Governors of the Federal Reserve System (U.S.).
  5. Boucekkine, Raouf & del Rio, Fernando & Licandro, Omar, 1999. "Endogenous vs Exogenously Driven Fluctuations in Vintage Capital Models," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 1999007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  6. BOUCEKKINE, Raouf & GERMAIN, Marc & LICANDRO, Omar & MAGNUS, Alphonse, . "Creative destruction, investment volatility, and the average age of capital," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1376, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Raouf Boucekkine & Marc Germain & Omar Licandro, . "Replacement echoes in the vintage capital growth model," Working Papers, FEDEA 96-16, FEDEA.
  8. Hercowitz, Zvi, 1998. "The 'embodiment' controversy: A review essay," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(1), pages 217-224, February.
  9. Martin Neil Baily, 1981. "Productivity and the Services of Capital and Labor," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 1-66.
  10. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  11. Jess Benhabib & Aldo Rustichini, 1990. "Vintage Capital, Investment and Growth," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 886, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Krusell, Per, 1998. " Investment-Specific R&D and the Decline in the Relative Price of Capital," Journal of Economic Growth, Springer, Springer, vol. 3(2), pages 131-41, June.
  13. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 2000. "The role of investment-specific technological change in the business cycle," European Economic Review, Elsevier, Elsevier, vol. 44(1), pages 91-115, January.
  14. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
  15. Martin Neil Baily & Robert J. Gordon, 1988. "The Productivity Slowdown, Measurement Issues, and the Explosion of Computer Power," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 347-432.
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Cited by:
  1. Raouf BOUCEKKINE & David DE LA CROIX & Yiannis VAILAKIS, 2002. "Technological Shocks and IT Revolutions," Discussion Papers (REL - Recherches Economiques de Louvain), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2002015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Raouf BOUCEKKINE & Fernando DEL RIO & Omar LICANDRO, 2002. "Embodied Technological Change, Learning-by-Doing and the Productivity Slowdown," Economics Working Papers, European University Institute ECO2002/12, European University Institute.
  3. Raouf Boucekkine & Fernando del Río & Omar Licandro, . "Obsolescence Vs modernization in a Schumpeterian vintage capital model," Working Papers, FEDEA 2000-27, FEDEA.
  4. Ana Goicolea & Omar Licandro & Reyes Maroto, 2001. "Picos de inversión y productividad del trabajo en los establecimientos industriales madrileños," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 25(2), pages 255-288, May.

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