Neutral or Factor Saving Innovations?
11 Pages Posted: 14 Feb 2019
Date Written: December 11, 2018
We present a theoretical argument to identify the conditions under which a firm prefers to invest in factor saving innovations rather than neutral innovations. We prove that incentives to invest in factor saving innovations positively depend on i) total factor productivity and ii) the scarcity of the factor.
Keywords: Factor Shares, Production Function, Productivity
JEL Classification: O11, O30, O41, O47, E01, E25
Suggested Citation: Suggested Citation