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Why Does Technology Advance in Cycles?

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Author Info

  • Olsson, Ola

    ()
    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Abstract

Long-run technological progress is cyclical because drastic innovations that introduce new technological opportunity are only profitable at times when repeated incremental innovation has nearly exhausted existing technological opportunity and driven entrepreneurial profit and income growth towards zero. The article presents a ’technological opportunity model’ where endogenous drastic and incremental innovations interact with exogenous discoveries in an idealized metric technology space. New ideas are created by convex combinations of existing ideas. Diminishing technological opportunity results in lower profits and growth, which then makes costly and risky drastic innovations profitable again. This relationship between intense drastic innovation intensity and poor levels of economic growth receives some empirical support.

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File URL: http://swopec.hhs.se/gunwpe/papers/gunwpe0038.pdf
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 38.

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Length: 33 pages
Date of creation: 21 Mar 2001
Date of revision:
Handle: RePEc:hhs:gunwpe:0038

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research

Keywords: technology; growth; long waves; cycles; techno-logical paradigms; innovations;

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References

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Cited by:
  1. I. Hakan Yetkiner & Albert de Vaal & Adriaan van Zon, 2003. "The Cyclical Advancement of Drastic Technologies," Working Papers FNU-21, Research unit Sustainability and Global Change, Hamburg University, revised Apr 2003.
  2. Lundström, Susanna, 2003. "Technological Opportunities and Growth in the Natural Resource Sector," Working Papers in Economics 116, University of Gothenburg, Department of Economics.
  3. Zon,Adriaan,van & Fortune,Emmanuelle & Kronenberg,Tobias, 2003. "How to Sow and Reap as You Go: a Simple Model of Cyclical Endogenous Growth," Research Memorandum 029, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).

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