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Special Interests and Technological change

We study an OLG economy where productivity growth comes from two alternative sources: process innovation and learning-by-doing. There is a trade-off between the two in so far as frequent technological updates reduce the scope for learning on existing technologies. A conflict is shown to arise between the young and the old, because the former favour innovation while the latter prefer learning. We model the interaction between overlapping generations and policy makers as a dynamic common agency problem, where competing generations invest a certain amount of resources to lobby either for the maintenance of the current technology or the adoption of a new one. By focusing on truthful Markov perfect equilibria, we characterize the political equilibrium and show its dependence on the underlying demographic, technological and preference parameters. Copyright 2005, Wiley-Blackwell.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 340.

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Date of creation: Feb 1999
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Handle: RePEc:bol:bodewp:340
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  1. Krusell, Per & Rios-Rull, Jose-Victor, 1996. "Vested Interests in a Positive Theory of Stagnation and Growth," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 301-29, April.
  2. Grossman, G.M. & Helpman, E., 1996. "Intergenerational Redistribution with Short-Lived Governments," Papers 178, Princeton, Woodrow Wilson School - Public and International Affairs.
  3. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
  4. Dixit, Avinash & Grossman, Gene M & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 752-69, August.
  5. Lohmann, Susanne, 1995. " Information, Access, and Contributions: A Signaling Model of Lobbying," Public Choice, Springer, vol. 85(3-4), pages 267-84, December.
  6. Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
  7. Maskin, Eric & Tirole, Jean, 2001. "Markov Perfect Equilibrium: I. Observable Actions," Journal of Economic Theory, Elsevier, vol. 100(2), pages 191-219, October.
  8. Elmar WOLFSTETTER, 1994. "Auctions: An Introduction," SFB 373 Discussion Papers 1994,13, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  9. Dirk & Juuso Valimaki, 1998. "Dynamic Common Agency," Cowles Foundation Discussion Papers 1206, Cowles Foundation for Research in Economics, Yale University.
  10. John G. Riley & William Samuelson, 1979. "Optimal Auctions," UCLA Economics Working Papers 152, UCLA Department of Economics.
  11. Wittman, Donald, 1989. "Why Democracies Produce Efficient Results," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1395-1424, December.
  12. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
  13. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
  14. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
  15. James M. Snyder, 1991. "On Buying Legislatures," Economics and Politics, Wiley Blackwell, vol. 3(2), pages 93-109, 07.
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