Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128352
Authors: 
Irmen, Andreas
Tabakovic, Amer
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5643
Abstract: 
The determinants of the direction of technical change and their implications for economic growth and economic policy are studied in the one-sector neoclassical growth model of Ramsey, Cass, and Koopmans extended to allow for endogenous capital- and labor-augmenting technical change. We develop a novel micro-foundation for the competitive production sector that rests on the idea that the fabrication of output requires tasks to be performed by capital and labor. Firms may engage in innovation investments that increase the productivity of capital and labor in the performance of their respective tasks. These investments are associated with new technological knowledge that accumulates over time and sustains long-run growth. We show that the equilibrium allocation is not Pareto-efficient since both forms of technical change give rise to an inter-temporal knowledge externality. An appropriate policy of investment subsidies may implement the efficient allocation.
Subjects: 
endogenous technical change
induced innovation
capital- and labor-augmenting technical change
neoclassical growth model
JEL: 
O31
O33
O41
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.