Abstract
This paper analyzes the employment and investment demands of the competitive firm when technological progress embodied in new investment goods is a source of productivity improvements. It is shown that technological progress reduces the implicit cost of capital services as well as its sensitivity to variations in the price system. Several versions of LeChatelier's principle are established showing how technological progress modifies the price sensitivity of the factor demands. Rapid technological progress makes the factor demands less sensitive to price variations. However employment demand becomes less (more) sensitive to interest rate changes when capital and labor are complements (substitutes).
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