A Time to Sow and a Time to Reap: Growth Based on General Purpose Technologies

45 Pages Posted: 9 Jul 2000 Last revised: 26 Dec 2001

See all articles by Elhanan Helpman

Elhanan Helpman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Manuel Trajtenberg

Tel Aviv University - Eitan Berglas School of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: September 1994

Abstract

We develop a model of growth driven by successive improvements in 'General Purpose Technologies' (GPT's), such as the steam engine, electricity, or micro-electronics. Each new generation of GPT's prompts investments in complementary inputs, and impacts the economy after enough such compatible inputs become available. The long-run dynamics take the form of recurrent cycles: during the first phase of each cycle output and productivity grow slowly or even decline, and it is only in the second phase that growth starts in earnest. The historical record of productivity growth associated with electrification, and perhaps also of computerization lately, may offer supportive evidence for this pattern. In lieu of analytical comparative dynamics, we conduct simulations of the model over a wide range of parameters, and analyze the results statistically. We extend the model to allow for skilled and unskilled labor, and explore the implications for the behavior over time of their relative wages. We also explore diffusion in the context of a multi-sector economy.

Suggested Citation

Helpman, Elhanan and Trajtenberg, Manuel, A Time to Sow and a Time to Reap: Growth Based on General Purpose Technologies (September 1994). NBER Working Paper No. w4854. Available at SSRN: https://ssrn.com/abstract=226530

Elhanan Helpman (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-4690 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Manuel Trajtenberg

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3640 9911 (Phone)
+972 3640 9908 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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