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Direction and Intensity of Technical Change: a Micro Model

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  • Luca Zamparelli

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.

Suggested Citation

  • Luca Zamparelli, 2009. "Direction and Intensity of Technical Change: a Micro Model," Working Papers 4, Doctoral School of Economics, Sapienza University of Rome.
    • Handle: RePEc:dsc:wpaper:4
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    File URL: http://phdschool-economics.dse.uniroma1.it/website/workingpapers/zamparelliWP4.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Induced innovation; endogenous growth; direction of technical change;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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