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The Optimal Control of Technology Choices

  • Orlando Gomes

    (Escola Superior de Comunicação Social)

We may distinguish between two concepts of technology: a theoretical level of technology (that is, a technology possibilities frontier) and a level of technology in practice (that is, ready to use in production technology). Having these two concepts in mind, the paper develops an intertemporal optimization model in which we may control the theoretical knowledge frontier. If one wants to expand this frontier an obstacle arises: the resources devoted to create knowledge are diverted from the implementation of technology to productive uses. There is a trade-off between the two technology variables and we explore such a conflict under an optimal control framework. The paper also develops an application of this framework. An economic growth problem is built by putting together the previously presented setup and a capital accumulation constraint. The result is an endogenous growth model where long run growth depends on the technology choices made by a social planner.

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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0409008.

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Length: 21 pages
Date of creation: 28 Sep 2004
Date of revision:
Handle: RePEc:wpa:wuwpge:0409008
Note: Type of Document - pdf; pages: 21
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Barro, Robert J., 1990. "Human capital and growth: Theory and evidence : A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 287-291, January.
  2. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
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  4. Per Krusell & Anthony A. Smith & Jr., 1998. "Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 867-896, October.
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  8. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
  9. Evans, Geroge W & Honkapohja, Seppo & Romer, Paul, 1998. "Growth Cycles," American Economic Review, American Economic Association, vol. 88(3), pages 495-515, June.
  10. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
  11. Aghion, Philippe & Tirole, Jean, 1994. "The Management of Innovation," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1185-1209, November.
  12. Paul M. Romer, 1989. "Human Capital And Growth: Theory and Evidence," NBER Working Papers 3173, National Bureau of Economic Research, Inc.
  13. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, June.
  14. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
  15. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
  16. Stephen J. Turnovsky, 2000. "Methods of Macroeconomic Dynamics, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262201232, June.
  17. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  18. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-67, December.
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