A Dynamic Input-Output Model with Endogenous Technical Change

Abstract

Technical change has played a decisive role in bringing about socio-economical structural changes. It has similarly exerted a strong influence on the history of industrialization, the evolution of political regimes, changes in international relations, and in the acquisition or loss of ability to play a hegemonic role in the world. We all recognize the importance of economic power both domestically and internationally, but technical change which brings about a shift in economic power is not directly dealt with in the framework of economics. We need to focus on this segment of the economy in discussing future growth potentials, employment possibilities, and international relations. The discussion so far, however, has tended to lack a consistent theoretical framework. In order to avoid confusion over the matters arising from this tendency, we have proposed that the discussion be based on a dynamic input-output framework. It seems that it is the most appropriate method for measuring the knowledge orientation of an economy in that it provides a consistent framework encompassing final demand, inter-industrial relationships, and factor inputs. Needless to say, input-output tables form the core of the Systems of National Accounts, and are widely available in many countries, providing both theoretical generality and empirical applicability.