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Direction and intensity of technical change: a micro-founded growth model

  • zamparelli, luca

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: https://mpra.ub.uni-muenchen.de/10843/1/MPRA_paper_10843.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10843.

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Date of creation: Feb 2008
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Handle: RePEc:pra:mprapa:10843
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  1. Robert J. Gordon, 1991. "Productivity, Wages, and Prices Inside and Outside of Manufacturing in the U.S., Japan, and Europe," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 153-207 National Bureau of Economic Research, Inc.
  2. 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.
  3. Bester, Helmut & Petrakis, Emmanuel, 1998. "Wages and Productivity Growth in a Competitive Industry," CEPR Discussion Papers 2031, C.E.P.R. Discussion Papers.
  4. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  5. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers 148, Princeton, Woodrow Wilson School - Public and International Affairs.
  6. Daron Acemoglu, 2000. "Labor- and Capital- Augmenting Technical Change," NBER Working Papers 7544, National Bureau of Economic Research, Inc.
  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. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  9. 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.
  10. Emmanuel M. Drandakis & Edmond S. Phelps, 1965. "A Model of Induced Invention, Growth and Distribution," Cowles Foundation Discussion Papers 186, Cowles Foundation for Research in Economics, Yale University.
  11. 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.
  12. 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.
  13. 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.
  14. Shah, Anup & Desai, Meghnad, 1981. "Growth Cycles with Induced Technical Change," Economic Journal, Royal Economic Society, vol. 91(364), pages 1006-10, December.
  15. Funk, Peter, 2002. "Induced Innovation Revisited," Economica, London School of Economics and Political Science, vol. 69(273), pages 155-71, February.
  16. 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.
  17. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 43-61.
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