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Substitution and Complementarity in Endogenous Innovation

  • Alwyn Young
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    The influence of Schumpeter's notion of "creative destruction" may have led to an overemphasis on substitution between technologies in recent models of endogenous innovation. Historical examples of technological change suggest that new technologies may just as frequently complement older technologies, creating, rather than destroying, rents. Acknowledgement of the potential for both substitution and complementarity amongst inventions allows for a much richer characterization of the growth process, creating the possibility of threshold effects and multiple equilibria, and bringing to the forefront the important role played by the expectations of inventive entrepreneurs.

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    File URL: http://www.nber.org/papers/w4256.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4256.

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    Date of creation: Jan 1993
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    Publication status: published as The Quarterly Journal of Economics, vol. cviii, issue 3, August 1993, (MIT Press, Cambridge),pp. 775-807.
    Handle: RePEc:nbr:nberwo:4256
    Note: EFG
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    1. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
    2. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-26, October.
    3. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc.
    4. Mak, James & Walton, Gary M., 1972. "Steamboats and the Great Productivity Surge In River Transportation," The Journal of Economic History, Cambridge University Press, vol. 32(03), pages 619-640, September.
    5. Kiminori Matsuyama, 1990. "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Discussion Papers 878, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    6. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September.
    7. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
    8. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
    9. Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 651-667.
    10. Lucas, Robert E, Jr, 1986. "Adaptive Behavior and Economic Theory," The Journal of Business, University of Chicago Press, vol. 59(4), pages S401-26, October.
    11. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
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