Munich Personal RePEc Archive

Direction and intensity of technical change: a micro-founded growth model

zamparelli, luca (2008): Direction and intensity of technical change: a micro-founded growth model.

[img]
Preview
PDF
MPRA_paper_10843.pdf

Download (184kB) | Preview

Abstract

This paper develops a growth model combining elements of endogenous growth and induced innovation literatures. In a standard induced innovation model firms select at no cost innovations from an innovation possibilities frontier describing the trade-off between increasing capital or labor productivity. The model proposed allows firms to choose not only the direction but also the size of innovation by representing the innovation possibilities through a cost function of capital and labor augmenting innovations. By so doing, it provides a micro-foundation both of the intensity and of the direction of technical change. The policy analysis implies that an increase in subsidies to R&D as opposed to capital accumulation raises per capita steady state growth, employment rate and wage share.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.