Diversity and Technological Progress

Daron Acemoglu

No 16984, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper proposes a tractable model to study the equilibrium diversity of technological progress and shows that equilibrium technological progress may exhibit too little diversity (too much conformity), in particular, foregoing socially beneficial investments in "alternative" technologies that will be used at some point in the future. The presence of future innovations that will replace current innovations imply that social benefits from innovation are not fully internalized. As a consequence, the market favors technologies that generate current gains relative to those that will bear fruit in the future; current innovations in research lines that will be profitable in the future are discouraged because current innovations are typically followed by further innovations before they can be profitably marketed. A social planner would choose a more diverse research portfolio and would induce a higher growth rate than the equilibrium allocation. The diversity of researchers is a partial (imperfect) remedy against the misallocation induced by the market. Researchers with different interests, competences or ideas may choose non-profit maximizing and thus more diverse research portfolios, indirectly contributing to economic growth.

JEL-codes: C65 O30 O31 O33 (search for similar items in EconPapers)
Date: 2011-04
New Economics Papers: this item is included in nep-dge, nep-ino, nep-pke and nep-tid
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published as Diversity and Technological Progress , Daron Acemoglu. in The Rate and Direction of Inventive Activity Revisited , Lerner and Stern. 2012

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