Cost-Reducing Technologies and Labor Supply in a Krugman-type Model where Consumption is Time-Constrained: Some New Results

Pant Manoj and Sugandha Huria
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Pant Manoj: Indian Institute of Foreign Trade, New Delhi, Delhi, India

The B.E. Journal of Theoretical Economics, 2023, vol. 23, issue 2, 823-836

Abstract: This study demonstrates why traditional “cost-saving” technical progress fails in an economy where consumption is time-constrained. In such a case, introducing “time-saving” technical progress establishes a new consumption-production equilibrium characterized by higher per-capita consumption and real income, lower prices, and, a higher scale of production for surviving producers. Nonetheless, since there is a limit to how much time can be saved by technological advances, the model also suggests an alternative solution in the form of a rising labor force (say via immigration) to close the production-consumption gap. This solution generates an unambiguous increase in welfare, vis-à-vis cost-reducing or time-saving technical progress.

Keywords: cost-saving technical progress; time-saving technical progress; consumption-time; general equilibrium model; demographics; immigration (search for similar items in EconPapers)
JEL-codes: D11 D21 D50 O14 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/bejte-2022-0067

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