A Framework for Examining Technical Change

Technical change is dynamic, recursive, and endogenous to the economic system. However, empirical studies usually treat technology as exogenous, defining technical change in terms of its end result changes in some production possibilities set. An endogenous view of technical change is necessary to understand, anticipate, and perhaps alter the development and use of new technologies and their associated problems. This article outlines a conceptual framework in which technical change is endogenous. The framework accounts for the dynamic and recursive interactions between research and development activities, the adoption and diffusion of new innovations, and the regulatory and institutional environment. As an example, the development of glyphosate-tolerant crops is discussed to show how the framework can be used to identify, organize, and understand the important variables and relationships for a specific case of technical change.