Journal Article

Special Interests and Technological Change

Giorgio Bellettini and Gianmarco I. P. Ottaviano

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 72, issue 1, pages 43-56
Published in print January 2005 | ISSN: 0034-6527
Published online January 2005 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/0034-6527.00323
Special Interests and Technological Change

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We study an OLG economy where productivity growth comes from two alternative sources: process innovation and learning-by-doing. There is a trade-off between the two in so far as frequent technological updates reduce the scope for learning on existing technologies. A conflict is shown to arise between the young and the old, because the former favour innovation while the latter prefer learning. We model the interaction between overlapping generations and policy makers as a dynamic common agency problem, where competing generations invest a certain amount of resources to lobby either for the maintenance of the current technology or the adoption of a new one. By focusing on truthful Markov perfect equilibria, we characterize the political equilibrium and show its dependence on the underlying demographic, technological and preference parameters.

Keywords: E13; O33

Journal Article.  7417 words.  Illustrated.

Subjects: Technological Change; Research and Development ; General Aggregative Models

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