Year: 2018
Type: article
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. A fixed mark‐up can yield Marx‐biased technological change. 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.
Source: Metroeconomica
DOI: 10.1111/meca.12223
Author: Eric Kemp‐Benedict
Institution: Stockholm Environment Institute
Language: English
Topic: Economic Theory and Policy
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2800433150