Direction and intensity of technical change: a micro-founded growth model
AbstractThis paper develops a growth model combining elements of endogenous growth and induced innovation literatures. In a standard induced innovation model firms select at no cost innovations from an innovation possibilities frontier describing the trade-off between increasing capital or labor productivity. The model proposed allows firms to choose not only the direction but also the size of innovation by representing the innovation possibilities through a cost function of capital and labor augmenting innovations. By so doing, it provides a micro-foundation both of the intensity and of the direction of technical change. The policy analysis implies that an increase in subsidies to R&D as opposed to capital accumulation raises per capita steady state growth, employment rate and wage share.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10843.
Date of creation: Feb 2008
Date of revision:
Induced innovation; endogenous growth; direction of technical change;
Find related papers by JEL classification:
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- 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-2008-10-07 (All new papers)
- NEP-CSE-2008-10-07 (Economics of Strategic Management)
- NEP-DGE-2008-10-07 (Dynamic General Equilibrium)
- NEP-EFF-2008-10-07 (Efficiency & Productivity)
- NEP-INO-2008-10-07 (Innovation)
- NEP-KNM-2008-10-07 (Knowledge Management & Knowledge Economy)
- NEP-MIC-2008-10-07 (Microeconomics)
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