LOCALIZED TECHNICAL PROGRESS AND CHOICE OF TECHNIQUE IN A LINEAR PRODUCTION MODEL

The problem of choice of technique in single production linear models has been extensively analysed under the assumption that the set of processes available in the economy is exogenously given and globally known. However, since Atkinson and Stiglitz's 1969 article economists have considered technical change as a cumulative, localized and adaptive process. The aim of this paper is to develop an adaptive model of choice of technique within a classical theoretical framework. Our model provides, although in a very stylized way, an explicit description of the relationship between the currently employed processes of production and the new ones. This allows us to analyse in a rigorous way the 'secular' dynamics of the economy. Copyright Blackwell Publishing Ltd 2005.