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A Time to Sow and a Time to Reap: Growth Based on General Purpose Technologies

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  • Helpman, Elhanan
  • Trajtenberg, Manuel

Abstract

We develop a model of growth driven by successive improvements in `General Purpose Technologies' (GPTs), such as the steam engine, electricity, or micro-electronics. Each new generation of GPTs prompts investments in complementary inputs and impacts the economy after enough such compatible inputs become available. The long-run dynamics take the form of recurrent cycles: during the first phase of each cycle output and productivity grow slowly or even decline, and it is only in the second phase that growth starts in earnest. The historical record of productivity growth associated with electrification, and perhaps also of computerization lately, may offer supportive evidence for this pattern. In lieu of analytical comparative dynamics, we conduct simulations of the model over a wide range of parameters, and analyse the results statistically. We extend the model to allow for skilled and unskilled labour, and explore the implications for the behaviour over time of their relative wages. We also explore diffusion in the context of a multi-sector economy.

Suggested Citation

  • Helpman, Elhanan & Trajtenberg, Manuel, 1994. "A Time to Sow and a Time to Reap: Growth Based on General Purpose Technologies," CEPR Discussion Papers 1080, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1080
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    References listed on IDEAS

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    1. Bresnahan, Timothy F. & Trajtenberg, M., 1995. "General purpose technologies 'Engines of growth'?," Journal of Econometrics, Elsevier, vol. 65(1), pages 83-108, January.
    2. David, Paul A., 1989. "COMPUTER AND DYNAMO: The Modern Productivity Paradox in a Not-Too Distant Mirror," Economic Research Papers 268373, University of Warwick - Department of Economics.
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    More about this item

    Keywords

    General Purpose Technology; Growth; Productivity;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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