Abstract
ABSTRACTThe article explores the impact of the diffusion of new methods of production on output and employment growth and income distribution within a Classical one‐sector framework. Disequilibrium paths are studied analytically and in terms of simulations. Diffusion by differential growth affects aggregate dynamics through several channels. The analysis reveals the non‐steady nature of economic change and shows that the adaptation pattern depends both on the innovation's factor‐saving bias and on the extent of the bias, which determines the strength of the selection pressure on non‐innovators. The typology of different cases developed shows various aspects of Schumpeter's concept of creative destruction.
Highlights
In this article, elements of the modern classical approach to economics and elements of evolutionary economics are combined to study the process of diffusion of a new and economically superior production method and its impact on output and employment growth and income distribution
The two papers differ in method and scope, both base their considerations on Schumpeters (1934) vision of the process of technical change as a stylised sequence of invention, innovation and diffusion; and they agree that it is the process of diffusion which determines the economic effect of new ways of doing things
Our study shows that economic development proceeds in a non-constant way and involves a number of effects that differ in direction and magnitude
Summary
Elements of the modern classical approach to economics and elements of evolutionary economics are combined to study the process of diffusion of a new and economically superior production method and its impact on output and employment growth and income distribution This task is accomplished by adapting the Classical one-commodity model of Kurz and Salvadori The above two papers emphasize different mechanisms that drive the process of adaptation: For Kurz (2008) as for Schumpeter (1934) imitation is key to adaptation, whereas Metcalfe and Steedman (2013) view differential growth as the prime mechanism of diffusion The latter mechanism is central to the evolutionary account of economic selection and creative destruction.
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