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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. Joseph Zeira, 1994. "Informational Cycles," Review of Economic Studies, Oxford University Press, vol. 61(1), pages 31-44.
  2. David K. Backus & Patrick J. Kehoe, 1992. "International Evidence on the Historical Properties of Business Cycles," Working Papers 92-5, New York University, Leonard N. Stern School of Business, Department of Economics.
  3. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  4. Paul Klemperer, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 375-394.
  5. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
  6. Jones, R. & Newman, G., 1991. "Economic Growth as a Coordination Problem," Discussion Papers dp91-11, Department of Economics, Simon Fraser University.
  7. Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders in the Theory of Growth," NBER Working Papers 3099, National Bureau of Economic Research, Inc.
  8. Aghion, Philippe & Howitt, Peter, 1991. "Growth and Unemployment," CEPR Discussion Papers 577, C.E.P.R. Discussion Papers.
  9. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  10. Bean, C., 1989. "Endogenous Growth And The Procyclical Behaviour Of Productivity," Papers 369, London School of Economics - Centre for Labour Economics.
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