A model of embodied technical change and employment

A “vintage” framework is described for studying the effects of technical change on economic development, particular attention being given to the level of employment. The framework is based on the notion that investment in new techniques is a major mechanism through which improvements in productivity are obtained. With the specification of demand and investment functions, a simple dynamic model is developed by means of which the effects of both continuous and discontinuous technical changes can be investigated, under various assumptions regarding the response of other economic variables to such changes. It is shown that a variety of behavioral characteristics are produced when technical change does not occur smoothly; in particular, it is suggested that variations in rates of technical change may act as a determinant of fluctuations in other economic variables.