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Technological innovations: slumps and booms

Author

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  • Felli, Leonardo
  • Ortalo-Magné, François

Abstract

This paper documents the delayed adoption of a major technological innovation: the adoption of the diesel locomotive in the US railway industry. Contrary to other instances of major technological innovations, the delay in the adoption of the diesel locomotive was not associated with an initial slump in output. We provide a theoretical model which is consistent with both an increase and a decrease in output following the invention of a new technology. Within this model we identify the key factors that make a slump in output unlikely.

Suggested Citation

  • Felli, Leonardo & Ortalo-Magné, François, 1997. "Technological innovations: slumps and booms," LSE Research Online Documents on Economics 4696, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:4696
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    File URL: http://eprints.lse.ac.uk/4696/
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    References listed on IDEAS

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    1. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "Competitive Diffusion," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 24-52, February.
    2. Helpman, Elhanan & Trajtenberg, Manuel, 1994. "A Time to Sow and a Time to Reap: Growth Based on General Purpose Technologies," CEPR Discussion Papers 1080, C.E.P.R. Discussion Papers.
    3. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    4. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-361, May.
    5. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-1165, December.
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    Cited by:

    1. Rodolfo E. Manuelli & Ananth Seshadri, 2014. "Frictionless Technology Diffusion: The Case of Tractors," American Economic Review, American Economic Association, vol. 104(4), pages 1368-1391, April.
    2. Nahuis, R., 1998. "The Dynamics of a General Purpose Technology in a Research and Assimilation Model," Other publications TiSEM 001a5f0f-16ac-4e0a-957c-8, Tilburg University, School of Economics and Management.
    3. Aruga, Osamu, 2007. "Conventional or New? Optimal Investment Allocation across Vintages of Technology," MPRA Paper 6043, University Library of Munich, Germany.

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    More about this item

    Keywords

    technological innovations; locomotives; slumps; learning-by- doing;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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