Factor-eliminating technical change

Pietro Peretto and John Seater ()

Journal of Monetary Economics, 2013, vol. 60, issue 4, 459-473

Abstract: Perpetual growth requires offsetting diminishing returns to reproducible factors of production. In this article we present a theory of factor elimination. For simplicity and clarity, there is no augmentation of non-reproducible factors, thus excluding the standard engine of growth. By spending resources on R&D, agents learn to change the exponents of a Cobb–Douglas production function. We obtain the economy's balanced growth path and complete transition dynamics. The theory provides a mechanism for the transition from an initial technology incapable of supporting perpetual growth to one with constant returns to reproducible factors that supports it.

Date: 2013
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Related works:
Working Paper: Factor-Eliminating Technical Change (2010)
Working Paper: Factor-Eliminating Technical Change (2010)
Working Paper: Factor-Eliminating Technical Change (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:60:y:2013:i:4:p:459-473

DOI: 10.1016/j.jmoneco.2013.01.005

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