A MICROECONOMIC APPROACH TO INDUCED INNOVATION

Invention possibilities are reformulated using research processes which have a cost and different implications for rates and biases of technical change. In the comparative static model a firm has the choice to build a plant of existing design or to improve it by research. The firm maximizes present value over the lifetime of the plant. Research costs and present value of capital and labor costs influence research mix and rate and bias to technical change. Controversies in the literature of induced innovation are discussed in terms of the model. A rise in labor costs does not necessarily lead to a more labor saving bias.


Issue Date:
1974
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/14152
Total Pages:
49
Series Statement:
Staff Paper P74-3




 Record created 2017-04-01, last modified 2017-04-04

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