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The Calm Before the Storm? - Anticipating the Arrival of General Purpose Technologies

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Author Info
Daniel Schiess () (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
Roger Wehrli () (CER-ETH Center of Economic Research at ETH Zurich, Switzerland)
Abstract

This paper presents a Schumpeterian quality-ladder model incorporating the impact of new General Purpose Technologies (GPTs). GPTs are breakthrough technologies with a wide range of applications, opening up new innovational complementarities. In contrast to most existing models which focus on the events after the arrival of a new GPT, the model developed in this paper focuses on the events before the arrival if R&D firms know the point of time and the technological impact of this drastic innovation. In this framework we can show, that the economy goes through three main phases: First, the economy is in its old steady state. Second, there are transitional dynamics and finally, the economy is in a new steady state with higher growth rates. The transitional dynamics are characterized by oscillating cycles. Shortly before the arrival of a new GPT, there is an increase in R&D activities and growth going even beyond the old steady state levels and immediately before the arrival of the new GPT, there is a large slump in R&D activities using the old GPT.

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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 08/81.

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Length: 28 pages
Date of creation: Feb 2008
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Handle: RePEc:eth:wpswif:08-81

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Related research
Keywords: Schumpeterian growth; research and development; general purpose technologies;

Find related papers by JEL classification:
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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