The Role of Technological Change

We develop an optimal growth model that includes several important new features. First, technological change is endogenously related to the growth of 'knowledge.' Investment may be directed either towards physical capital or knowledge (or both). Knowledge becomes an effective substitute fo...

Full description

Saved in:
Bibliographic Details
Main Authors: AYRES, Robert U., MILLER, Steven M.
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 1980
Subjects:
Online Access:https://ink.library.smu.edu.sg/sis_research/26
https://ink.library.smu.edu.sg/context/sis_research/article/1025/viewcontent/Role_Tech_Change_1980.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Singapore Management University
Language: English
Description
Summary:We develop an optimal growth model that includes several important new features. First, technological change is endogenously related to the growth of 'knowledge.' Investment may be directed either towards physical capital or knowledge (or both). Knowledge becomes an effective substitute for scarce resources by increasing the technical efficiency of resource utilization both for consumption and in capital. Nevertheless, a finite quantity resource must be embodied in capital and a finite flow is required for depreciation. Thus, there is an upper limit to technical efficiency and economic growth is thus ultimately limited by the availability of renewable resources. For a simple aggregate production function it is shown that technical efficiency never approaches unity on an optimal path.