Development, technological change and innovation, Schumpeter and neo-Schumpeterians

This review essay is devoted to a discussion of some central aspects of the Schumpeterian and neo-Schumpeterian approaches to the dynamic processes of development, technological change and innovation. This essay is organised in two parts. In the first, Schumpeter's insightful distinction between circular flow and development is discussed. In the second, some central elements of the neo-Schumpeterian interpretation and extension of Schumpeter's views are critically outlined, special emphasis being placed on some recent attempts to formalize several of his insights on the cyclical dynamics of the processes of technological change and innovation. I should stress that due to space constraints I will focus primarily upon macrotheoretic issues, thus paying only secondary attention to the neo-Schumpeterian literature on the microeconomics of technological change and to the burgeoning empirical developments along those lines.

Investment-specific technological change and the Brazilian macroeconomy

We studied the effects of changes in banking spreads on distributions of income, wealth and consumption as well as the welfare of the economy. This analysis was based on a model of heterogeneous agents with incomplete markets and occupational choice, in which the informality of firms and workers is a relevant transmission channel. The main finding is that reductions in spreads for firms increase the proportion of entrepreneurs and formal workers in the economy, thereby decreasing the size of the informal sector. The effects on inequality, however, are ambiguous and depend on wage dynamics and government transfers. Reductions in spreads for individuals lead to a reduction in inequality indicators at the expense of consumption and aggregate welfare. By calibrating the model to Brazil for the 2003-2012 period, it is possible to find results in line with the recent drop in informality and the wage gap between formal and informal workers.

Endogenous growth with deferred technological change

Lucas (2009) propôs um modelo com dois setores para explicar padrões observados em dados de crescimento. Entretanto, a análise de Lucas não envolve uma decisão intertemporal para o consumidor. O comportamento das variáveis é determinado à priori pela tecnologia escolhida. Rodriguez (2006) propôs um modelo com a tecnologia com dois setores apresentada por Lucas adicionando um processo de decisão intertemporal para o consumidor. Adicionalmente aos resultados obtidos por Rodriguez, nós caracterizamos suficiência e apresentamos exemplos esclarecedores de casos particulares do modelo. Ademais, nós fazemos um esforço para derivar novos insights e esclarecer alguns pontos técnicos. Finalmente, nós obtemos condições sob as quais a economia investe em capital humano mesmo com benefícios diferidos.

Implications of ernbodied technological change for development economics

Employing a embodied technologic change model in which the time decision of scrapping old vintages of capital and adopt newer one is endogenous we show that the elasticity of substitutions among capital and labor plays a key role in determining the optimum life span of capital. In particular, for the CD case the life span of capital does not depend on the relative price of it. The estimation of the model's long-run investment function shows, for a Panel data set consisting of 125 economies for 25 years, that the price elasticity of investment is lower than one; we rejected the CD specification. Our calibration for the US suggests 0.4 for the technical elasticity of substitution. In order to get a theoretical consistent concept of aggregate capital we derive the relative price profile for a shadow second-hand market for capital. The shape of the model's theoretical price curve reproduces the empírical estimation of it. \lVe plug the calibrate version of the long-run solution of the model to a cross-section of economies data set to get the implied TFP, that is, the part of the productivity which is not explained by the model. We show that the mo dei represent a good improvement, comparing to the standard neoc!assical growth model with CD production function and disembodied technical change, in accounting the world diversity in productivity. In addition the model describes the fact that a very poor economy can experience fast growth based on capital accumulation until the point of becoming a middle income economy; from this point on it has to rely on TFP increase in order to keep growing.

Knowledge disclosure as a weapon in technological change battles: straight shot or backfire?

This work aims at evaluating how effective is knowledge disclosure in attenuating institutional negative reactions caused by uncertainties brought by firms’ new strategies that respond to novel technologies. The empirical setting is from an era of technological ferment, the period of the introduction of the voice over internet protocol (VoIP) in the USA in the early 2000’s. This technology led to the convergence of the wireline telecommu- nications and cable television industries. The Institutional Brokers’ Estimate System (also known as the I/B/E/S system) was used to capture reactions of securities analysts, a revealed important source of institutional pressure on firms’ strategies. For assessing knowledge disclosure, a coding technique and a established content analysis framework were used to quantitatively measure the non-numerical and unstructured data of transcripts of business events occurred at that time. Eventually, several binary response models were tested in order to assess the effect of knowledge disclosure on the probability of institutional positive reactions. The findings are that the odds of favorable institutional reactions increase when a specific kind of knowledge is disclosed. It can be concluded that knowledge disclosure can be considered as a weapon in technological changes situations, attenuating adverse institutional reactions to the companies’ strategies in environments of technological changes.

The implications of embodiment and Putty-Clay to economic development

In this paper we construct and analyze a growth model with the following three ingredients. (i) Technological progress is embodied. (ii) The production function of a firm is such that the firm makes both technology upgrade as well as capital and labor decisions. (iii) The firm’s production technology is putty-clay. We assume that there are disincentives to the accumulation of capital, resulting in a divergence between the social and the private cost of investment. We solve a single firm’s problem in this environment. Then we determine general equilibrium prices of capital goods of different vintages. Using these prices we aggregate firms’ decisions and construct the theoretical analogues of National Income statistics. This generates a relationship between disincentives and per capita incomes. We analyze this relationship and show the quantitative and qualitative roles of embodiment and putty-clay. We also show how the model is taken to data, quantified and used to determine to what extent income gaps across countries can be attributed to disincentives.

Occupational tasks and changes in the wage structure

This paper argues that changes in the returns to occupational tasks have contributed to changes in the wage distribution over the last three decades. Using Current Population Survey (CPS) data, we first show that the 1990s polarization of wages is explained by changes in wage setting between and within occupations, which are well captured by tasks measures linked to technological change and offshorability. Using a decomposition based on Firpo, Fortin, and Lemieux (2009), we find that technological change and deunionization played a central role in the 1980s and 1990s, while offshorability became an important factor from the 1990s onwards.

Environmental policy and growth when inputs are differentiated in pollution intensity

Environmental policy affects the distribution of market shares if intermediate goods are differentiated in their pollution intensity. When innovations are environment-friendly, a tax on emissions skews demand towards new goods which are the most productive. In this case, the tax has to increase along a balanced growth path to keep the market shares of goods of different vintages constant. Comparing balanced growth paths, we find that an increase in the burden of environmental taxation spurs innovation because it increases the market share of recent vintages. As a result the cost of environmental policy in terms of slower growth is weaker and may even be absent.