On modelling technological progress
Date
1992
Authors
Lynch, B. Mark
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Abstract
Traditional models of output growth have accounted for the impact of
technological change under the assumption that technological change is "neutral" to the production process. Technological progress is considered
neutral when the relationship between the marginal product of some input and some other economic variable remains unchanged. Three types of technological neutrality have been employed in past studies: Hicks neutral, Harrod neutral and Solow neutral. However, there has been no convincing argument why a tendency for each individual type of neutrality should exist. This thesis develops a direct demand function associated to a Diewert cost function to test for the presence of Hicks, Harrod or Solow technological change using U.S. business investment data for the period 1934 through 1980. The model employs technological paramaters which exclude the a priori assumption that technological progress is Hicks, Harrod or Solow neutral. Maximum likelihood functions are generated in order to conduct a log likelihood ratio test to determine which type of technological neutrality is present over the series tested. The empirical model fails to identify the type of technological neutrality present. The thesis concludes that future research pertaining to technological progress should incorporate parameters which model technological progress as a stochastic event over time.
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Keywords
UN SDG 9: Industry, Innovation, and Infrastructure