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A Second-Order Approximation to Technology Choices

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  • Orlando Gomes

    (Escola Superior de Comunicação Social)

Abstract

Resources used in scientific activities are, as any other, scarce. Hence, the economic system has, in every time moment, to choose how to allocate technological inputs. A technology choices model is developed, where scarce scientific resources are alternatively allocated to basic science activities and to applied technology uses. We find that saddle path stability holds for a not too high intertemporal discount rate. The accomplished result is found for a generic quadratic objective function, that is, for a second-order Taylor series approximation of a felicity function regarding technology development goals.

Suggested Citation

  • Orlando Gomes, 2004. "A Second-Order Approximation to Technology Choices," GE, Growth, Math methods 0409007, EconWPA.
  • Handle: RePEc:wpa:wuwpge:0409007 Note: Type of Document - pdf; pages: 11
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
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    7. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    8. Pierpaolo Benigno & Michael Woodford, 2004. "Optimal Monetary and Fiscal Policy: A Linear-Quadratic Approach," NBER Chapters,in: NBER Macroeconomics Annual 2003, Volume 18, pages 271-364 National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Technology; Optimal control; Transitional dynamics; Saddle- path stability; Taylor-series expansion;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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