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Direction and Intensity of Technical Change: a Micro Model

  • Luca Zamparelli

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    This paper develops a growth model combining elements of endogenous growth and induced innovation literatures. In a standard induced innovation model firms select at no cost innovations from an innovation possibilities frontier describing the trade-off between increasing capital or labor productivity. The model proposed allows firms to choose not only the direction but also the size of innovation by representing the innovation possibilities through a cost function of capital and labor augmenting innovations. By so doing, it provides a micro-foundation both of the intensity and of the direction of technical change. The policy analysis implies that an increase in subsidies to R&D as opposed to capital accumulation raises per capita steady state growth, employment rate and wage share.

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    File URL: http://phdschool-economics.dse.uniroma1.it/website/workingpapers/zamparelliWP4.pdf
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    Paper provided by Doctoral School of Economics, Sapienza University of Rome in its series Working Papers with number 4.

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    Length: 22 pages
    Date of creation: Feb 2009
    Date of revision:
    Handle: RePEc:dsc:wpaper:4
    Contact details of provider: Web page: http://phdschool-economics.dse.uniroma1.it/website/

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    1. Bester, Helmut & Petrakis, Emmanuel, 1998. "Wages and Productivity Growth in a Competitive Industry," CEPR Discussion Papers 2031, C.E.P.R. Discussion Papers.
    2. A. J. Julius, 2005. "Steady-State Growth And Distribution With An Endogenous Direction Of Technical Change," Metroeconomica, Wiley Blackwell, vol. 56(1), pages 101-125, 02.
    3. Shah, Anup & Desai, Meghnad, 1981. "Growth Cycles with Induced Technical Change," Economic Journal, Royal Economic Society, vol. 91(364), pages 1006-10, December.
    4. Funk, Peter, 2002. "Induced Innovation Revisited," Economica, London School of Economics and Political Science, vol. 69(273), pages 155-71, February.
    5. Irmen, Andreas, 2005. "Extensive and intensive growth in a neoclassical framework," Journal of Economic Dynamics and Control, Elsevier, vol. 29(8), pages 1427-1448, August.
    6. Thomas Michl, 1999. "Biased Technical Change and the Aggregate Production Function," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(2), pages 193-206.
    7. Hellwig, Martin & Irmen, Andreas, 1999. "Endogenous Technical Change in a Competitive Economy," Sonderforschungsbereich 504 Publications 99-53, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    8. Foley, Duncan K., 2003. "Endogenous technical change with externalities in a classical growth model," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 167-189, October.
    9. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
    10. Frank Thompson, 1995. "Technical Change, Accumulation and the Rate of Profit," Review of Radical Political Economics, Union for Radical Political Economics, vol. 27(1), pages 97-126, March.
    11. van der Ploeg, F., 1987. "Growth cycles, induced technical change, and perpetual conflict over the distribution of income," Journal of Macroeconomics, Elsevier, vol. 9(1), pages 1-12.
    12. Daron Acemoglu, 2000. "Labor- and Capital- Augmenting Technical Change," NBER Working Papers 7544, National Bureau of Economic Research, Inc.
    13. Nelson H. Barbosa-Filho & Lance Taylor, 2006. "Distributive And Demand Cycles In The Us Economy-A Structuralist Goodwin Model," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 389-411, 07.
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