Localized and Biased Technologies: Atkinson and Stiglitz's New View, Induced Innovations, and Directed Technological Change¶

Literature › Works

Daron Acemoglu (2014). Localized and Biased Technologies: Atkinson and Stiglitz's New View, Induced Innovations, and Directed Technological Change. NBER Working Paper Series, No. 20060. National Bureau of Economic Research.


Type	working paper
Scope	Comparative and methods
Method	theoretical or conceptual
Period studied	-
Themes	comparative theory
Citation key	`acemoglu2014`

Argument¶

The paper revisits Atkinson and Stiglitz's 1969 'new view' that technological progress is localized to the techniques currently in use rather than neutral across all capital-labor ratios. It links this to the 1960s induced innovation literature and to the directed technological change literature. It argues that the micro-founded directed technological change framework, with monopolistic competition among technology suppliers, resolves the modeling difficulties of the earlier approaches and sometimes yields different answers. These answers concern appropriate technology, skill-biased technological change, task-based labor markets, trade and technology, and technological unemployment. The treatment is purely theoretical and has no South African content.

Evidence and method¶

No empirical data. The paper relies on stylized production-function models and figures (Atkinson-Stiglitz localized shifts, Kennedy's innovation possibilities frontier, Acemoglu's directed technical change models) and on a review of prior literature.

Findings¶

Atkinson and Stiglitz challenged the neutral-technology orthodoxy by treating progress as localized to techniques in use. (p. 3)

technological progress is localized and improves the productivity of the techniques (or “activities”) currently being used and perhaps some similar techniques with neighboring capital-labor ratios
Localized technological change is necessarily biased, and the new view implies it must be modeled as directed. (p. 4)

technological change is biased. This can readily be observed from Figure 2, where the slope of the production function
The induced innovation literature rested on an ad hoc firm objective that is hard to motivate with modern modeling standards. (p. 8)

The objective function posited for the ﬁrms, maximizing (2), is diﬃcult to motivate
Directed technological change micro-founds the earlier ideas by introducing technology monopolists and monopolistic competition. (p. 10)

new technologies create monopoly power for their inventor, thus leading to monopolistic competition
Technologies built for rich economies can be inappropriate for capital-scarce agricultural economies. (p. 12)

the contribution of these technologies to a capital-scarce agricultural economy where such machinery are absent may be limited
Whether technology augments a scarce factor depends on the elasticity of substitution. (p. 13)

The answer is yes when elasticity of substitution is greater than 1, and no when it is less than 1.
In the micro-founded model, factor scarcity induces technology biased against the scarce factor. (p. 14)

whenever a factor becomes more scarce, technology becomes endogenously biased against that factor
With a sufficiently high elasticity of substitution, relative factor demand curves with endogenous technology slope upward. (p. 15)

the relative demand curves for factors with endogenous technology is upward sloping
Localized technological change could reconcile technological unemployment with the historical record. (p. 18)

then the presence of technology-driven unemployment today may not contradict the historical record