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Investment, Innovation, and Growth

Benton F. Massell

Abstract

The present paper considers, in a one-sector growth model, the relationship between investment and technical progress--in particular, the impact of the rate of investment on the level of technology. The notion of an optimal capital replacement period is developed and shown to depend on the rates of technical change and of investment. Finally, the model is used to evaluate a method which has previously been used to apportion increases in output per man-hour between investment and improvements in technology.