Mechanization and Economic Fluctuation

This paper analyzes the technical change characterized by replacing labor with machinery in the production process. Generally, this type of technical change does not alter total factor productivity (TFP). Meanwhile, there exists a complementary relationship between the technical change and capital accumulation, so that an economy can attain longrun growth. Moreover, postulating discrete changes in technique, we show how an economy repeats two types of regimes by turns : one is a regime with technical change and the other is a regime without it. In the former regime, the new technique prevails gradually, and even a very weak externality can bring increasing returns