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Cost-Reducing Technologies and Labor Supply in a Krugman-type Model where Consumption is Time-Constrained: Some New Results

Author

Listed:
  • Pant Manoj

    (Indian Institute of Foreign Trade, New Delhi, Delhi, India)

  • Huria Sugandha

    (Indian Institute of Foreign Trade, New Delhi, Delhi, India)

Abstract

This study demonstrates why traditional “cost-saving” technical progress fails in an economy where consumption is time-constrained. In such a case, introducing “time-saving” technical progress establishes a new consumption-production equilibrium characterized by higher per-capita consumption and real income, lower prices, and, a higher scale of production for surviving producers. Nonetheless, since there is a limit to how much time can be saved by technological advances, the model also suggests an alternative solution in the form of a rising labor force (say via immigration) to close the production-consumption gap. This solution generates an unambiguous increase in welfare, vis-à-vis cost-reducing or time-saving technical progress.

Suggested Citation

  • Pant Manoj & Huria Sugandha, 2023. "Cost-Reducing Technologies and Labor Supply in a Krugman-type Model where Consumption is Time-Constrained: Some New Results," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 23(2), pages 823-836, June.
    • Handle: RePEc:bpj:bejtec:v:23:y:2023:i:2:p:823-836:n:6
    DOI: 10.1515/bejte-2022-0067
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    More about this item

    Keywords

    cost-saving technical progress; time-saving technical progress; consumption-time; general equilibrium model; demographics; immigration;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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