This paper studies the pattern of technical change at the firm level by applying and extending the Quantal Response Statistical Equilibrium model (QRSE). The model assumes that a large number of cost minimizing firms decide whether to adopt a new technology based on the potential rate of cost reduction. The firm in the model is assumed to have a limited capacity to process market signals so there is a positive degree of uncertainty in adopting a new technology. The adoption decision by the firm, in turn, makes an impact on the whole market through changes in the factor-price ratio. The equilibrium distribution of the model is a unimodal probability distribution with four parameters, which is qualitatively different from the Walrasian notion of equilibrium in so far as the state of equilibrium is not a single state but a probability distribution of multiple states. This paper applies Bayesian inference to estimate the unknown parameters of the model using the firm-level data of seven advanced OECD countries over eight years and shows that the mentioned equilibrium distribution from the model can satisfactorily recover the observed pattern of technical change.
Other Recent Journal Article / Working Papers
Productivity Dispersion, Wage Dispersion and Superstar Firms
Future Series: Cybersecurity, emerging technology and systemic risk
Getting the message right on nature‐based solutions to climate change
Investing for net zero in the face of uncertainty: Real options and robust decision-making
National COVID debts: climate change imperils countries’ ability to repay
High Elasticity, Chemically Recyclable, Thermoplastics From Bio-Based Monomers: Carbon Dioxide, Limonene Oxide And Ε-Decalactone