VIIISupplyeffectsandinducedbiasininnovation八供给效应和创新引起的偏见

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1、VIII.SupplyeffectsandinducedbiasininnovationInducedBiasTraditionally,oneassumesthatTPenterstheproductionfunctioninsomeexogenouswayWhatifinnovatorscanex-anteseektoobtainagiventypeoftechnicalprogress?Thatiswhattheold“inducedbias”literaturetriestomodelThetraditionalviewInnovati

2、onaugmentingonefactorincreasesthereturntotheotherfactorBecauseofsuch“bottlenecks”,furtherinnovationwillbebiasedinfavoroftheotherfactorWeeventuallyexpectinnovationtobe“balanced”Thesebottlenecksimplythatifonefactorismoreabundant,innovationwillfavortheotherfactor,tocompensateTh

3、emodernview(Acemoglu)Thereexistsmarketsizeeffects:profitsfromaninnovationdependpositivelyonitsmarketsizeMarketsizeislargeriffactoraffectedbyinnovationismoreabundantThiseffecttendstoreinforceexistingbiasesratherthancompensatethemConsequencesforthedistributionofwagesIfmarketsi

4、zeeffectsdominatebottleneckeffects,thenanincreaseinH/Ltriggersskilled-biasedinnovationsTheseinnovationsthemselvesincreasetheskillpremium,Whichinturninducespeopletoaccumulatemorehumancapital…AsimpleheuristicargumentSupposefirmscould“pay”fortechnicalprogressinonedimensionorano

5、therHowmucharetheywillingtopay?ThatgivesusanideaofwhereTPisgoingtotakeplaceFirmswillingtopaymoremoreprofitsforinnovatorsThelogicProductionfunctionMarginalproductconditionsCostfunctionWillingnesstopayperunitofoutputTheequilibriumMWPfortechnicalprogressDiferentiatingcostfunct

6、ionsandsubstitutingMPconditions,wegetInterpretationBecauseofoptimality,howIreducecostsisirrelevantatthemarginSuppose,uponanincreaseinA,thatIreduceLproportionallyIproducethesame,andcostsarereducedbywLdA/A=F’1LdAWhathappenstoMWPwhenfactorendowmentschange?AssumeHgoesupThewageof

7、humancapitalfalls,thusreducingmysavingsfromhumancapitalaugmentingtechnicalprogress(bottleneckeffect)ButaproportionalreductioninHwouldaffectmorepeople,andthusbemoreprofitable(marketsizeeffect)ImplicationsfortheinducedbiasAssumethebiasinTPadjustssoastoequateMWPacrosstypesofTPT

8、hentheendogenousbiasisdeterminedbyThatformuladeterminestheendogenousskilled