Direction and Intensity of Technical Change: a Micro Model

This paper develops a growth model combining elements of endogenous growth and induced innovation literatures. In a standard induced innovation model firms select at no cost innovations from an innovation possibilities frontier describing the trade-off between increasing capital or labor productivity. The model proposed allows firms to choose not only the direction but also the size of innovation by representing the innovation possibilities through a cost function of capital and labor augmenting innovations. By so doing, it provides a micro-foundation both of the intensity and of the direction of technical change. The policy analysis implies that an increase in subsidies to R&D as opposed to capital accumulation raises per capita steady state growth, employment rate and wage share.Induced innovation, endogenous growth, direction of technical change

Average Cost and Marginal Cost Pricing in Marshall: Textual Analysis and Interpretation

This paper proposes a textual analysis of Marshall’s theory of firm pricing behavior under competitive conditions. It considers to what extent average cost and marginal cost pricing rules characterize Marshall’s competitive partial equilibrium, and it shows that the two rules differ for origins and can be reconciled only with great difficulty in a general equilibrium framework.Marshall, classical competition, perfect competition, marginal and average cost

Direction and intensity of technical change: a micro-founded growth model

This paper develops a growth model combining elements of endogenous growth and induced innovation literatures. In a standard induced innovation model firms select at no cost innovations from an innovation possibilities frontier describing the trade-off between increasing capital or labor productivity. The model proposed allows firms to choose not only the direction but also the size of innovation by representing the innovation possibilities through a cost function of capital and labor augmenting innovations. By so doing, it provides a micro-foundation both of the intensity and of the direction of technical change. The policy analysis implies that an increase in subsidies to R&D as opposed to capital accumulation raises per capita steady state growth, employment rate and wage share.Induced innovation; endogenous growth; direction of technical change

On Robust Asymmetric Equilibria in Asymmetric R&D-Driven Growth Economies

In an R&D-driven growth model with asymmetric fundamentals the steady state equilibrium R&D investments are industry-specific and they are such that R&D returns are equalized across industries. Return equalization, however, makes investors indifferent as to where to target research and, hence, the problem of allocation of R&D investments across industries is indeterminate. Agents' indifference creates an ambiguous investment scenario. We assume that agents hold "ambiguous" beliefs on the per-industry profitability of their R&D investments. Investors' aversion towards ambiguity (in the sense of Gilboa-Schmeidler, 1989) eliminates the indeterminacy of the R&D investment problem. In particular, we prove that the asymmetric return-equalizing equilibrium is robust against a however small degree of investors' aversion to ambiguity.R&D driven growth models, symmetry/asymmetry, ambiguity

Nasopharyngeal and oropharyngeal swabs, and/or serology for SARS COVID-19: What are we looking for?

Governments and clinicians that were fully involved in the dramatic SARS-CoV-2 outbreak during the last few weeks in Italy (and more or less all over the world) are fiercely debating the use of methods for screening this viral infection. Thus, all countries are employing a lot of resources in order to test more and more subjects. For this purpose, there are different strategies, based on either direct or indirect tests. Among the first category, the main assays used for SARS-CoV-2 are based on a real-time reverse transcriptase polymerase chain reaction (RT-PCR). Such tests can be performed on nasopharyngeal and oropharyngeal swabs for the categories of those with symptoms and those potentially exposed. In order to integrate the molecular assays in the diagnosis of SARS-CoV-2, a wide range of serology immunoassays (IAs) have also been developed. If we want to identify “immune” people in order to let them to come back to work, serology is the best (and probably the only) approach

The Importance of Industrial Policy in Quality-Ladder Growth Models

We extend the class of quality-ladder growth models (Grossman- Helpman (1991), Segerstrom (1998) and others), to encompass an economy with asymmetric fundamentals. In contrast to the standard framework, in our model industries may di¤er in terms of their innovative potential (quality jumps and arrival rates) and consumers�preferences. This extension allows us to bring industrial policy back into the realm of the growth policy debate. We �rst show that it is always possible to raise the long-run growth rate and the social welfare of the economy through a costless tax/subsidy scheme reallocating resources towards the relatively more promising industries. We then prove that, in certain economies, even a mere pro�t taxation policy increases economic growth and social welfare above the laissez-faire.Innovation-Driven Growth, Asymmetric Fundamentals, Industrial Policy

An Uncertainty-Based Explanation of Symmetric

We provide a re-foundation of the symmetric growth equilibrium characterizing the research sector of all vertical R&D-driven growth models. This result does not rely on the usual assumption of a symmetric expectation on the future per-sector R&D expenditure. Indeed, with this structure of expectations, returns in R&D are equalized, and agents turn out to be indifferent as to where targeting research: hence, the problem of the allocation of R&D investments across sectors is indeterminate. In line with the ’true’ Schumpeterian perspective, we solve this indeterminacy by allowing for decision makers strictly uncertain about the future per-sector distribution of R&D efforts. By using the Gilboa-Schmeidler’s MEU decision rule, we prove that the symmetric structure of R&D investment is the unique rational expectations (RE) equilibrium compatible with uncertainty-averse agents adopting a maximin strategy.

Balanced growth and structural breaks: Evidence for Germany

One of the central hypotheses of the neoclassical growth literature is the balanced- growth hypothesis, which predicts that output, consumption, and investment grow at the same rate. Empirically, this implies that the consumption-to-output ratio and the investment-to-output ratio must be stationary and that consumption and investment must be cointegrated with output. This paper tests these implications with respect to Germany, using unit root tests and cointegration techniques that allow for an endogenously determined structural break. We find that the long-run growth path of the German economy is consistent with the balanced-growth hypothesis if we allow for a structural break associated with the worldwide productivity slowdown of the early 1970s.Balanced growth × Unit roots × Cointegration × Endogenous structural breaks