A Behavioral-Institutional Model of Endogenous Growth and Induced Technical Change

Journal of Economic Issues, p. 40, 2009

Posted: 18 Jan 2010

Date Written: 2009

Abstract

Technological change is modeled as endogenous in the sense that it is affected by economic, behavioral, and institutional variables. Technological change is especially affected by changes in relative input prices and their level, of which the price of labor is particularly important. Input prices are affected by institutional variables. Such prices also impact on the firm's efficiency, which in turn affects growth rates as well as the rate of technical change. As relative factor prices or their level increase, firms are induced to innovate or adopt extant technology to remain competitive or to maintain current profit rates. High wage firms can be expected to engage in such induced technological change, leading the growth process thereby yielding lower unit costs and increasing the level of material welfare. Relatively low wage economies can be locked into a state of economic inefficiency and laggard technological progress, especially in the long run.

Keywords: Technological Change, Input prices, Labour price, Efficiency, Growth rates

JEL Classification: C51, O33, O47

Suggested Citation

Altman, Morris, A Behavioral-Institutional Model of Endogenous Growth and Induced Technical Change (2009). Journal of Economic Issues, p. 40, 2009 . Available at SSRN: https://ssrn.com/abstract=1536872

Morris Altman (Contact Author)

University of Newcastle ( email )

University Drive
Callaghan, NSW 2308
Australia

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