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Adaptive Capital, Information Depreciation and Schumpeterian Growth

Listed author(s):
  • Jones, Robert
  • Newman, Geoffrey

This paper develops a search-theoretic approach to optimal growth where agents anticipate continuing technology advance. When agents require an adaptive search investment to 'match with' any new technology, but when this learning is depreciated at the inception of the next, the authors show that an economy will sustain either an equilibrium with frequent advances, coupled with inefficient matching, or one with exactly the opposite characteristics. The cyclical implication is that the immediate effect of technology adoption is a downturn, not a boom. The model offers a broader representation of Schumpeterian creative destruction while augmenting the human capital foundations of endogenous growth theory. Copyright 1995 by Royal Economic Society.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 105 (1995)
Issue (Month): 431 (July)
Pages: 897-915

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Handle: RePEc:ecj:econjl:v:105:y:1995:i:431:p:897-915
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  1. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
  2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
  3. Paul Klemperer, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 375-394.
  4. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
  5. Bean, Charles R., 1990. "Endogenous growth and the procyclical behaviour of productivity," European Economic Review, Elsevier, vol. 34(2-3), pages 355-363, May.
  6. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 43-61.
  7. Joseph Zeira, 1994. "Informational Cycles," Review of Economic Studies, Oxford University Press, vol. 61(1), pages 31-44.
  8. Backus, David K & Kehoe, Patrick J, 1992. "International Evidence of the Historical Properties of Business Cycles," American Economic Review, American Economic Association, vol. 82(4), pages 864-888, September.
  9. Jones, R. & Newman, G., 1991. "Economic Growth as a Coordination Problem," Discussion Papers dp91-11, Department of Economics, Simon Fraser University.
  10. Philippe Aghion & Peter Howitt, 1994. "Growth and Unemployment," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 477-494.
  11. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
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