time. The first key element of our theory is that energy intensity is a feature of technology and is embodied in capital as a fixed requirement. Capital is putty-clay as in Atkeson and Kehoe (1999) : once the requirement is fixed it cannot be changed over the lifetime of capital. Agents, though, can choose to invest in less (or more) energy intensive capital and that choice responds to economic conditions. The second key element in our theory is that we assume that there is InvestmentSpecificTechnicalChange (ISTC hereafter). That is, there are innovations that
quality of these investment goods. The distinction between TFP (neutral progress in this paper) and investment-specifictechnicalchange (henceforth, ISTC) has been widely used, e.g., Greenwood, Hercowitz, and Krusell (2000) or Fisher (2006), while the one between technical change in non-ICT and ICT equipment is rather novel in business cycle literature. This further distinction is pursued because ISTC exhibits very different patterns when separated according to the source of innovations. During the post-war sample the evolution of ISTC in ICT varies greatly from that
. (out2i,t) refers to imports of intermediate goods
from manufacturing industries outside industry i to industry i relative to gross output. log(GO)
refers to the log of gross output in total manufacturing. Technology change refers to lagged
investment-specifictechnicalchange in industry i. All regressions include a first order
autoregressive process (not reported). t-statistics are White Heteroscedasticity consistent. ***
significant at 1 pct. level, ** significant at 5 pct. level, and * significant at 10 pct. level.
Source: IDA, Statistics Denmark (2000
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support relatively high consumption levels when
aid payments revert back to normal levels, and therefore consumption levels will
follow a smooth transition. The more temporary the change is perceived, the larger
will be the effect on the savings rate, the capital stock, and output.
Note that for both types of aid the responses follow standard macro-intuition.
For TA, responses are identical to models with investmentspecifictechnicalchange.
In those models, an investment specific technology shock affects the relative price
of physical capital, whereas in our model a
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first change from to (A.3)
to (A.5) (and welfare from (A.4) to (A.6)). Then, when the follower invests
in R&D, the profit changes from (A.5) to (A.7) (and welfare from (A.6) to
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Cummins, J.G., and Violante, G.L. “Investment-SpecificTechnicalChange
in the United States (1947-2000): Measurement and Macroeconomic
Consequences.” Review of Economic Dynamics, 5, (2002), pp. 243-284.
Cohen, W.M., Goto A., Nagata A., Nelson R.R., and Walsh, J.P., “R
till the end of the sample following the method de-
scribed in J. Cummins and G. Violante (2002) “Investment-SpecificTechnicalChange in the Unites States (1947-2000): Measurement and Macroeconomic
Consequences”, Review of Economic Dynamics, Vol. 5, pp. 243-284.
Price mark-up is an index defined as the ratio of the GDP deflator to the
unit labor costs. Series of unit labor costs are taken from the OECD Unit
Labour Costs Database and the International Labor Comparison elaborated
by the U.S. Bureau of Labor Statistics. For Spain, the data start in 1979,