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Implementing Technology

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  • Diego Comin
  • Bart Hobijn

Abstract

We introduce a tractable model of endogenous growth in which the returns to innovation are determined by the technology adoption decisions of the users of new technologies. Technology adoption involves an implementation investment that determines the initial productivity of a new technology. After implementation, learning increases the productivity of a technology to its full potential. In this framework, implementation enhances growth, while growth increases obsolescence and reduces implementation. In a calibrated version of our model, the optimal policy involves a subsidy to capital and to implementation and a R&D tax. This policy would lead to a welfare improvement of 7.6 percent. Out of steady-state analysis yields that the transitional dynamics of the detrended variables after a shock to capital are very similar to the dynamics of the neoclassical growth model, but transitory shocks have permanent effects on the level of productivity.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12886.

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Date of creation: Feb 2007
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Handle: RePEc:nbr:nberwo:12886

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  1. Charles I. Jones & John C. Williams, 1999. "Too Much of a Good Thing? The Economics of Investment in R&D," NBER Working Papers 7283, National Bureau of Economic Research, Inc.
  2. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
  3. Acemoglu, Daron & Zilibotti, Fabrizio, 1998. "Productivity Differences," Seminar Papers, Stockholm University, Institute for International Economic Studies 660, Stockholm University, Institute for International Economic Studies.
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  6. Susanto Basu & David N. Weil, 1998. "Appropriate Technology And Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(4), pages 1025-1054, November.
  7. Diego Comin & Mark Gertler, 2006. "Medium-Term Business Cycles," American Economic Review, American Economic Association, American Economic Association, vol. 96(3), pages 523-551, June.
  8. Caselli, G & Ventura, J, 1996. "A Representative Consumer Theory of Distribution," Papers, Harvard - Institute for International Development 534, Harvard - Institute for International Development.
  9. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers, DELTA (Ecole normale supérieure) 90-12, DELTA (Ecole normale supérieure).
  10. Jan Eeckhout & Boyan Jovanovic, 2002. "Knowledge Spillovers and Inequality," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1290-1307, December.
  11. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, Elsevier, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
  12. Carol A. Corrado & Charles R. Hulten & Daniel E. Sichel, 2006. "Intangible Capital and Economic Growth," NBER Working Papers 11948, National Bureau of Economic Research, Inc.
  13. 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.
  14. Erik Brynjolfsson & Loren Hitt & Shinkyu Yang, 2002. "Intangible Assets: How the Interaction of Computers and Organizational Structure Affects Stock Market Valuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 137-198.
  15. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  16. Elias Dinopoulos & Douglas Waldo, 2005. "Gradual Product Replacement, Intangible-Asset Prices and Schumpeterian Growth," Journal of Economic Growth, Springer, Springer, vol. 10(2), pages 135-157, 06.
  17. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(2), pages 298-321, April.
  18. Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(4), pages 561-83, August.
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Citations

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Cited by:
  1. Comin, Diego & Mestieri, Marti, 2013. "Technology Diffusion:Measurement, Causes and Consequences," TSE Working Papers, Toulouse School of Economics (TSE) 13-420, Toulouse School of Economics (TSE).
  2. Diego A. Comin & Bart Hobijn, 2010. "Technology Diffusion and Postwar Growth," NBER Working Papers 16378, National Bureau of Economic Research, Inc.
  3. Garicano, Luis & Rossi-Hansberg, Esteban, 2012. "Organizing growth," Journal of Economic Theory, Elsevier, Elsevier, vol. 147(2), pages 623-656.
  4. Antonio Navas & Davide Sala, 2013. "Innovation and Trade Policy Coordination: the Role of Firm Heterogeneity," Working Papers, The University of Sheffield, Department of Economics 2013017, The University of Sheffield, Department of Economics.
  5. Diego Comin & Bart Hobijn & Emilie Rovito, 2008. "Technology usage lags," Journal of Economic Growth, Springer, Springer, vol. 13(4), pages 237-256, December.
  6. Antonio Navas-Ruiz & Davide Sala, 2007. "Technology Adoption and the Selection Effect of Trade," Economics Working Papers, European University Institute ECO2007/58, European University Institute.
  7. Diego Comin & Bart Hobijn & Emilie Rovito, 2008. "A new approach to measuring technology with an application to the shape of the diffusion curves," The Journal of Technology Transfer, Springer, Springer, vol. 33(2), pages 187-207, April.
  8. Steven Cassou & Emanuel Xavier de Oliveira, 2011. "Barriers to technological adoption in Spain and Portugal," Portuguese Economic Journal, Springer, Springer, vol. 10(3), pages 189-209, December.

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