We extend the conventional neoclassical production and growth framework, with its emphasis on total factor productivity as the primary macroeconomic mechanism of innovation, to allow for technical change that affects consumer welfare directly. Our model is based on Lancaster's “New Approach to...

This paper argues that productivity puzzles like the Solow Paradox arise, in part, from the omission of an important dimension of the debate: the resource cost of achieving a given rate of technical change. A remedy is proposed in which a new parameter, defined as the cost elasticity of...

We extend the conventional Solow growth accounting model to allow innovation to affect consumer welfare directly. Our model is based on Lancaster’s New Approach to Consumer Theory, in which there is a separate “consumption technology� that transforms the produced goods,...