Cost-share induced technological change and Kaldor’s stylized facts

Kemp-Benedict, Eric (2018): Cost-share induced technological change and Kaldor’s stylized facts. Forthcoming in: Metroeconomica

Abstract

This paper presents a theory of induced technological change in which firms pursue a random, local, and bounded search for productivity-enhancing innovations. Firms implement profitable innovations at fixed prices, which then spread through the economy. After diffusion, all firms adjust prices and wages. The model is consistent with a variety of price-setting behaviors, which determine equilibrium positions characterized by constant cost shares and productivity growth rates. Target-return pricing yields Harrod-neutral technological change with a fixed wage share as a stable equilibrium, consistent with Kaldor’s stylized facts, while allowing for deviations from equilibrium, as observed in the longer historical record.

• Item Type: MPRA Paper
• Language: English
• Keywords: classical; post-Keynesian; evolutionary; induced technological change; Harrod-neutral technological change
• Subjects: E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes ; Keynesian ; Post-Keynesian; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E14 - Austrian ; Evolutionary ; Institutional; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes

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