Non-homothetic preferences and industry directed technical change

Franziska Weiss () and Timo Boppart

No 916, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: Taking a look at sectoral macroeconomic data, this paper motivates the importance of (i) structural change, (ii) biased technical change and (iii) non-homotheticity of preferences. We provide a tractable theory of directed technical change where households have non-homothetic preferences and structural change is a longrun phenomenon. Our theory and the input-output tables of the U.S. help us to reconstruct how structural change in terms of final consumption affected the market size of industry value added. Arguing that the structural change across broad categories of final consumption is exogenous from the perspective of an individual firm, this gives us an instrument for the industrial market size. We then empirically test for the market size effect of induced innovation. Our findings suggest that a 1 percent increase in market size of an industry leads to an increase in the TFP growth rate of about 0.29 percentage points over five years.

Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2013/paper_916.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:916

Access Statistics for this paper

More papers in 2013 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().