Endogenous Task-Based Technical Change - Factor Scarcity and Factor Prices

in Economics and Business Review (2020), 6

This paper develops a static model of endogenous task-based technical progress to study how factor scarcity induces technological progress and changes in factor prices. The equilibrium technology is multi ... [more ▼]

This paper develops a static model of endogenous task-based technical progress to study how factor scarcity induces technological progress and changes in factor prices. The equilibrium technology is multi-dimensional and not strongly factorsaving in the sense of Acemoglu (2010). Nevertheless, labour scarcity induces labour productivity growth. There is a weak but no strong absolute equilibrium bias. This model provides a plausible interpretation of the famous contention of Hicks (1932) about the role of factor prices and factor endowments for induced innovations. It may serve as a microfoundation for canonical macro-economic models. Moreover, it accommodates features like endogenous factor supplies and a binding minimum wage. . [less ▲]