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Invention and Bounded Learning by Doing

  • Alwyn Young
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    This paper presents a model of the interaction between invention and learning by doing. Learning depends upon invention in that learning by doing is viewed as the serendipitous exploration of the finite productive potential of invented technologies. At the same time, the profitability of costly invention is dependent upon learning in that costs of production depend upon the society's aggregate historical learning experience. The resulting model is a true hybrid. With small markets, the profitability of invention is low, and hence the rate of invention becomes the constraining factor in growth. With large markets, invention is very profitable and tends to pull ahead of the society's learning experience. The consequent growing gap between the technological frontier and the society's industrial maturity squeezes returns, leading to an equilibrium in which the rate of invention (and growth) is paced by the society's rate of learning.

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    File URL: http://www.nber.org/papers/w3712.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3712.

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    Date of creation: May 1991
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    Publication status: published as Journal of Political Economy 101 (June 1993): 443-472.
    Handle: RePEc:nbr:nberwo:3712
    Note: EFG
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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    1. Grossman, G.M. & Helpman, E., 1988. "Comparative Advantage And Long-Run Growth," Papers 39-88, Tel Aviv.
    2. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
    3. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
    4. Marvin B. Lieberman, 1984. "The Learning Curve and Pricing in the Chemical Processing Industries," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 213-228, Summer.
    5. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    6. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
    7. Drew Fudenberg & Jean Tirole, 1983. "Learning-by-Doing and Market Performance," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 522-530, Autumn.
    8. Levhari, David & Sheshinski, Eytan, 1973. "Experience and Productivity in the Israel Diamond Industry," Econometrica, Econometric Society, vol. 41(2), pages 239-53, March.
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