Wave trains, innovation noise, and long waves

The paper takes up a Schumpeterian prototype model by Iwai [J. Econ. Behav. Org. 5 (1984) 321] on the interplay of technological innovation and diffus ion and studies its time series characteristics. The analysis begins with t he deterministic version of the model and its long-run equilibrium notion o f a wave train. The subsequent simulations of the full version with a stoch astic arrival of innovations typically yield long oscillations in the growt h rates of average productivity. These long waves can be viewed as originat ing with the frequency distribution of techniques on the deterministic wave train, from which the economy is disturbed and back to which it continuous ly seeks to adapt, where it is in the very nature of this adjustment proces s to take several decades. Across a wide range of parameter scenarios, the average wave lengths are also found to be closely related to the lifetime o f techniques on the corresponding wave trains. (C) 2001 Elsevier Science B. V. All rights reserved.