Innovation, Obsolescence and Profit as Drivers of Investment in Australian Manufacturing
20 Pages Posted: 10 Dec 2009
Date Written: December 9, 2009
This paper combines Salter’s analysis of capital-embodied technical change with Kalecki’s analysis of financing investment from retained profits to provide a model of investment with innovation, which is applied to data from Australian manufacturing industries. In the estimated model, profit is used as a measure of the ability to invest, and the rate of technical change embodied in new equipment (i.e. process innovation) reveals the inducement to invest. These two factors combine to explain the accumulation process and its link to technical progress.
Keywords: embodied technical change, Salter, Kalecki, vintage capital, investment
JEL Classification: E22, L16, 031
Suggested Citation: Suggested Citation