Premium
Induced Innovation, Endogenous Technical Change and Income Distribution in a Labor‐Constrained Model of Classical Growth
Author(s) -
Zamparelli Luca
Publication year - 2015
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/meca.12068
Subject(s) - economics , bargaining power , subsidy , labour economics , productivity , distribution (mathematics) , endogenous growth theory , technical change , wage share , capital accumulation , income distribution , capital (architecture) , growth model , microeconomics , human capital , macroeconomics , efficiency wage , inequality , market economy , wage , history , mathematical analysis , mathematics , archaeology
We present a steady state analysis of a labor‐constrained classical growth model with endogenous direction and intensity of technical change. Firms use retained profits to raise their productive capacity and to improve labor and capital productivities. Investments are planned to maximize instantaneous profits. Comparative dynamics exercises show that (1) an increase in the saving rate and in R & D subsidies raises the steady state labor share, labor productivity growth and the employment rate, and (2) a rise in workers' bargaining power reduces the employment rate while leaving productivity growth and distribution unaffected.