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Frontiers of Economics in China

Front. Econ. China    2016, Vol. 11 Issue (3) : 498-518     DOI: 10.3868/s060-005-016-0026-4
Orginal Article |
A Dynamic Model of the Choice of Technology in Economic Development
Haiwen Zhou1(),Ruhai Zhou2
1. Department of Economics, Old Dominion University, Norfolk, VA 23529, USA
2. Department of Mathematics and Statistics, Old Dominion University, Norfolk, VA 23529, USA
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Abstract

In this overlapping-generations model, there is unemployment in the manufacturing sector. Manufacturing firms engage in oligopolistic competition and choose technologies to maximize profits. With capital as a fixed cost of production, increasing returns in the manufacturing sector exist. In the unique steady state, first, when individuals become more patient, the savings rate increases while the level of an individual’s income decreases. Second, an increase in population or percentage of income spent on manufactured goods does not change steady-state technology while the level of an individual’s income decreases. Third, an increase in the wage rate leads manufacturing firms to choose more advanced technologies and the steady-state capital stock increases. Finally, an increase in the level of subsidies to technology adoption does not change steady-state technology.

Keywords choice of technology      overlapping-generations model      unemployment      economic development      increasing returns     
Issue Date: 23 September 2016
 Cite this article:   
Haiwen Zhou,Ruhai Zhou. A Dynamic Model of the Choice of Technology in Economic Development[J]. Front. Econ. China, 2016, 11(3): 498-518.
 URL:  
http://journal.hep.com.cn/fec/EN/10.3868/s060-005-016-0026-4
http://journal.hep.com.cn/fec/EN/Y2016/V11/I3/498
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