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Rate of Return Regulations and Factor Bias in Innovations

Montgomery, W. David and Quirk, James P. (1976) Rate of Return Regulations and Factor Bias in Innovations. Social Science Working Paper, 120. California Institute of Technology , Pasadena, CA. (Unpublished)

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The literature on the Averch-Johnson (A-J) effect focuses on the distortion that is introduced into the capital-labor ratio employed by a regulated firm as the result of rate of return regulation. This paper considers a related question, namely that of the effect of rate of return regulation on the mix of labor and capital-augmenting innovations produced and employed by a regulated firm. The regulated firm is assumed to possess "in house" capabilities for producing such innovations, and it is the responsiveness of its innovative activities to regulation that is the central theme of this paper. But the mix of innovative activities also affects the firm's choice of a capital/labor ratio in producing its final product. This more conventional notion of factor bias is also explored in the paper.

Item Type:Report or Paper (Working Paper)
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:120
Record Number:CaltechAUTHORS:20171027-153646768
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82753
Deposited By: Jacquelyn Bussone
Deposited On:30 Oct 2017 21:17
Last Modified:03 Oct 2019 18:58

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