Employment, New Equipment, Skill, and Growth

This paper studies the conditions under which new equipment may endogenously occur. To this end, we construct an endogenous growth multisectoral model with a preeminent new equipment sector. Technological progress is embodied: New machines can only be run on the most recent generations of hardware. While the new equipments are copyrighted during a fixed period of time, they become public knowledge at a certain point in time, which generates positive externalities in the rest of the economy. First, we find that our model can give rise to multiple steady states due to strategic complementarities. Substitution effects are shown to arise: The labor resources are diverted from the final goods sector to sustain the creation and production of new softwares. During the new equipments (for example during IT boom), labor productivity is growth slowdowns, the skill premium rises as well as the value of firms undertaking research. However, the registered new equipments is always transitory and nothing can be said about the long run sustainability of a new equipment-driven growth regime. We analyze consequences of the introduction the new equipments on the job and more in particularity on that the unskilled. We study the analysis of parameters and the economic policies