Abstract
This paper focuses on the transition between steady states of innovation-led growth, in the context of a general-equilibrium model in which the exogenous appearance of a new technological paradigm triggers a wave of endogenous, stochastic, incremental innovations through which it is implemented. The analysis demonstrates existence of a unique Markov-perfect equilibrium, and shows that its transition dynamics conform in expected values to commonly observed empirical patterns. These include an initial productivity decline followed by a greater increase in productivity; and 'creative destruction' that reduces the market value of traditional, incumbent firms while creating new value in innovative entrants.
Original language | English |
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Pages (from-to) | 183-205 |
Number of pages | 23 |
Journal | Structural Change and Economic Dynamics |
Volume | 15 |
Issue number | 2 |
DOIs | |
State | Published - 1 Jun 2004 |
Keywords
- General equilibrium
- Growth
- Innovation
- Technology
- Transitional dynamics
ASJC Scopus subject areas
- Economics and Econometrics