Factor Saving Innovation

Michele Boldrin and David Levine

No 3262, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: It has been argued that concave models exhibit less ?endogeneity of growth? than models with increasing returns to scale. Here we study a simple model of factor saving technological improvement in a concave framework. Capital can be used either to reproduce itself, or, at some additional cost, to produce a higher quality of capital, which requires less labour input. If better quality capital can be produced quickly, we get a model of exogenous balanced growth as a special case of ours. If, however, better quality capital can be produced slowly, we get a model of ?endogenous growth? in which the growth rate of the economy and the rate of adoption of new technologies is determined by preferences, technology and initial conditions. Moreover, in the latter case, the process of growth is necessarily uneven, exhibiting a natural cycle with alternating periods of high and slow growth. Growth paths and technological innovations also exhibit dependence upon initial conditions. The model provides a step toward a theory of endogenous innovation under conditions of perfect competition.

Keywords: One; two and multisector growth models; Measurement of economic growth; Aggregate productivity; Technological change; Choices and consequences; Innovation and invention; Processes and incentives (search for similar items in EconPapers)
JEL-codes: D24 D51 O31 O33 O41 O47 (search for similar items in EconPapers)
Date: 2002-03
New Economics Papers: this item is included in nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56)

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Related works:
Journal Article: Factor Saving Innovation (2002)
Working Paper: Factor saving innovation (2002)
Working Paper: Factor Saving Innovation (2001)
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