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A Dynamic Model of the Choice of Technology in Economic Development

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  • Zhou, Haiwen
  • Zhou, Ruhai

Abstract

In this overlapping-generations model, there is unemployment in the manufacturing sector. Manufacturing firms engage in oligopolistic competition and choose technologies to maximize profits. With capital as fixed costs of production, increasing returns in the manufacturing sector exist. In the unique steady state, first, when individuals become more patient, the saving rate increases while the level of income of an individual decreases. Second, an increase in population or percentage of income spent on the manufactured good does not change steady-state technology while decreases the level of income of an individual. Third, an increase in the wage rate leads a manufacturing firm to choose a more advanced technology and the steady-state capital stock increases. Finally, an increase in the level of subsidy to technology adoption does not change steady-state technology.

Suggested Citation

  • Zhou, Haiwen & Zhou, Ruhai, 2017. "A Dynamic Model of the Choice of Technology in Economic Development," MPRA Paper 81355, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:81355
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    References listed on IDEAS

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    Cited by:

    1. Haiwen Zhou, 2019. "Resource abundance, market size, and the choice of technology," Bulletin of Economic Research, Wiley Blackwell, vol. 71(4), pages 641-656, October.
    2. Yu Chen & Haiwen Zhou, 2017. "An Overlapping-Generations Model of Firm Heterogeneity in Economic Development," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 12(4), pages 660-676, December.
    3. Orlando Gomes, 2022. "Human capital and growth in an OLG-life cycle model," SN Business & Economics, Springer, vol. 2(1), pages 1-26, January.

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    More about this item

    Keywords

    choice of technology; overlapping-generations model; unemployment; economic development; increasing returns;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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