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An AB-SFC Model of Induced Technical Change along Classical and Keynesian Lines

Lucrezia Fanti

No 3/18, Working Papers from Sapienza University of Rome, DISS

Abstract: This paper introduces the classical idea about the so-called `directed' and `induced' technical change (ITC) within a Keynesian demand-side and evolutionary endogenous growth model in order to analyze the interplay among technical change, long-run economic growth and functional income distribution. An ITC process is analyzed within an Agent-Based Stock-Flow Consistent (AB-SFC) model, wherein credit-constrained heterogeneous firms choose both the intensity and the direction of the innovation towards a labor- or capital-saving choice of technique. In the longrun, the model reproduces the so-called `Kaldor stylized facts' (i.e. with a purely labor-saving technical change), however during the transitional phase the model shows a labor-saving/capitalusing innovation pattern, as the aggregate output-capital ratio decreases until it stabilizes in the long-run, as well as declining labor share for long time periods and we can ascribe these evidences mainly to the directed technical change process. In order to stress the e ective role of the innovation bias on the model dynamics, we compare the baseline scenario with a `counterfactual' scenario wherein a `neutral ' technical progress is at work.

Keywords: Agent-Based Macroeconomics; Stock-Flow Consistent Models; Induced Technical Change; Directed Innovation; Choice of Techniques; Labor Share; Growth and Distribution. (search for similar items in EconPapers)
JEL-codes: E24 E25 O30 O35 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hme, nep-mac and nep-pke
Date: 2018-05
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Working Paper: An AB-SFC Model of Induced Technical Change along Classical and Keynesian Lines (2018) Downloads
Working Paper: An AB-SFC Model of Induced Technical Change along Classical and Keynesian Lines (2018) Downloads
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