Induced Innovation, Endogenous Growth, and Income Distribution: a Model along Classical Lines
AbstractThis paper presents a classical micro-founded growth model with endogenous direction and size of technical change. In a standard induced innovation model firms freely adopt productivity improvements from an innovation possibilities frontier describing the trade-off between increasing capital or labor productivity. The shape of the innovation possibility frontier uniquely determines the steady state distribution of income. The model proposed allows firms to choose not only the direction but also the size of innovation by making innovation a costly activity requiring R&D investment. Comparative dynamics analysis shows that income distribution is are sensitive to saving parameters and fiscal policy. In particular, an increase in the discount factor or in subsidy to R&D raises the labor share.
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Bibliographic InfoPaper provided by Dipartimento di Economia e Finanza, LUISS Guido Carli in its series Working Papers CELEG with number 1102.
Date of creation: 2011
Date of revision:
Induced innovation; endogenous growth; direction of technical change; classical growth.;
Find related papers by JEL classification:
- D33 - Microeconomics - - Distribution - - - Factor Income Distribution
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-19 (All new papers)
- NEP-DGE-2011-03-19 (Dynamic General Equilibrium)
- NEP-FDG-2011-03-19 (Financial Development & Growth)
- NEP-HME-2011-03-19 (Heterodox Microeconomics)
- NEP-INO-2011-03-19 (Innovation)
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