Working Paper: NBER ID: w12886
Authors: Diego Comin; Bart Hobijn
Abstract: We introduce a tractable model of endogenous growth in which the returns to innovation are determined by the technology adoption decisions of the users of new technologies. Technology adoption involves an implementation investment that determines the initial productivity of a new technology. After implementation, learning increases the productivity of a technology to its full potential. In this framework, implementation enhances growth, while growth increases obsolescence and reduces implementation. In a calibrated version of our model, the optimal policy involves a subsidy to capital and to implementation and a R&D tax. This policy would lead to a welfare improvement of 7.6 percent. Out of steady-state analysis yields that the transitional dynamics of the detrended variables after a shock to capital are very similar to the dynamics of the neoclassical growth model, but transitory shocks have permanent effects on the level of productivity.
Keywords: technology implementation; endogenous growth; economic policy
JEL Codes: O00; O03
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| better implementation (L15) | increased productivity (O49) |
| increased productivity (O49) | economic growth (O49) |
| economic growth (O49) | reduced implementation investments (G31) |
| better implementation (L15) | economic growth (O49) |