This paper examines the role of alternative assumptions on savings and expectations for the fixwage traverse with strong forward biased technological change. After briefly outlining the model, some peculiarities of the adjustment path under the Hicksian Q-Assumption are investigated. Subsequently, the consequences of several savings functions consistent with the assumption of static expectations are explored. With all but one of these assumptions the possibility of permanent technological unemployment emerges. Additionally, the assumption of adaptive expectations is introduced, in which case technological unemployment throughout the early phase prevails. Furthermore, oscillating growth rates emerge, indicating the possibility of technologically caused business cycles.
Kraus, Margit and S. Wirth (2000), Savings, Expectations and Technological Unemployment. A Generalization of Assumptions for the Hicksian Fixwage Traverse, ZEW Discussion Paper No. 00-29, Mannheim. Download