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Induced Innovation and Marginal Cost of New Technology

Author

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  • Yucan Liu
  • C. Richard Shumway

    (School of Economic Sciences, Washington State University)

Abstract

The hypothesis of induced innovation has been empirically tested in many ways, using a wide variety of data and test periods for many industries in many countries. However, each test has maintained the hypothesis that the relative marginal cost of developing and implementing technologies that save one input is the same as for any other input. Lacking data on development and implementation costs of input-saving technologies, we develop and use a nonparametric procedure to estimate relative differences required for technical change in U.S. agriculture to be consistent with the induced innovation hypothesis.

Suggested Citation

  • Yucan Liu & C. Richard Shumway, 2008. "Induced Innovation and Marginal Cost of New Technology," Working Papers 2008-6, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:shumway-4
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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/Shumway/IIH_EconLetters-complete.pdf
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    References listed on IDEAS

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    1. Binswanger, Hans P, 1974. "The Measurement of Technical Change Biases with Many Factors of Production," American Economic Review, American Economic Association, vol. 64(6), pages 964-976, December.
    2. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 577-598.
    3. Yucan Liu & C. Richard Shumway, 2009. "Induced Innovation in U.S. Agriculture: Time-series, Direct Econometric, and Nonparametric Tests," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 224-236.
    4. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    5. Olmstead, Alan L & Rhode, Paul, 1993. "Induced Innovation in American Agriculture: A Reconsideration," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 100-118, February.
    6. Kawagoe, Toshihiko & Otsuka, Keijiro & Hayami, Yujiro, 1986. "Induced Bias of Technical Change in Agriculture: The United States and Japan, 1880-1980," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 523-544, June.
    7. Jean-Paul Chavas & Michael Aliber & Thomas L. Cox, 2000. "An Analysis Of The Source And Nature Of Technical Change: The Case Of U.S. Agriculture," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 482-492, August.
    8. V. Eldon Ball & Charles Hallahan & Richard Nehring, 2004. "Convergence of Productivity: An Analysis of the Catch-up Hypothesis within a Panel of States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1315-1321.
    9. Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, vol. 52(3), pages 579-597, May.
    10. Hayami, Yujiro & Ruttan, V W, 1970. "Factor Prices and Technical Change in Agricultural Development: The United States and Japan, 1880-1960," Journal of Political Economy, University of Chicago Press, vol. 78(5), pages 1115-1141, Sept.-Oct.
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    Cited by:

    1. Gautam Ahuja & Curba Morris Lampert & Vivek Tandon, 2014. "Paradigm-Changing vs. Paradigm-Deepening Innovation: How Firm Scope Influences Firm Technological Response to Shocks," Organization Science, INFORMS, vol. 25(3), pages 653-669, June.
    2. de Freitas, Luciano Charlita & Kaneko, Shinji, 2012. "Is there a causal relation between ethanol innovation and the market characteristics of fuels in Brazil?," Ecological Economics, Elsevier, vol. 74(C), pages 161-168.

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    More about this item

    Keywords

    induced innovation; marginal cost; nonparametric;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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