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Cost share‐induced technological change and Kaldor’s stylized facts
Author(s) -
KempBenedict Eric
Publication year - 2019
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.12223
Subject(s) - stylized fact , economics , technological change , productivity , yield (engineering) , microeconomics , constant (computer programming) , technical change , fixed cost , macroeconomics , computer science , programming language , materials science , metallurgy
This paper presents a theory of induced technological change in which firms pursue a random, local, and bounded search for productivity‐enhancing innovations. Firms implement profitable innovations at fixed prices, which then spread through the economy. After diffusion, all firms adjust prices and wages. The model is consistent with a variety of price‐setting behaviors, which determine equilibrium positions characterized by constant cost shares and productivity growth rates. A fixed mark‐up can yield Marx‐biased technological change. Target‐return pricing yields Harrod‐neutral technological change with a fixed wage share as a stable equilibrium, consistent with Kaldor's stylized facts, while allowing for deviations from equilibrium, as observed in the longer historical record.