(Un)anticipated Technological Change in an Endogenous Growth Model

Bruce A. Conway and Klaus Schenk-Hoppé
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Bruce A. Conway: University of Illinois at Urbana-Champaign

No 04-08, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: This paper examines numerically the impact of a negative exogenous shock to marginal productivity (such as ecological government regulation that becomes effective at some point in time) in an endogenous finite-time growth model with sluggish reallocation of human capital. The policy can be anticipated or unanticipated by firms, and it can also be announced but not implemented. It turns out that these frictions have a very strong long-run effect on output, consumption and on the optimal allocation of capital and labor in particular. The qualitative properties relate to homogenous labor models with positive productivity shocks. The problem is thus to maximize a function of a continuous system, where the system is subject to frictions and stepwise changes; for such a problem the application of calculus of variations necessary conditions is problematic. A numerical optimization method, which has had much success on qualitatively similar problems in engineering, has been employed.

Keywords: two-sector endogenous growth model; unanticipated and anticipated technological change; frictions in reallocation of human capital; Runge-Kutta parallel shooting algorithm (search for similar items in EconPapers)
JEL-codes: C61 E32 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2004-04
New Economics Papers: this item is included in nep-dev and nep-dge
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Journal Article: (Un)anticipated Technological Change in an Endogenous Growth Model (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:0408

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