Factor Replacement versus Factor Substitution, Mechanization and Asymptotic Harrod Neutrality

Danny Givon

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: This paper views technical change as a labor-saving, but capital-using, mechanization process, whereby capital replaces labor; though within any given technique, factors have a limited ability to substitute one another. This is formalized by reinterpreting the “distribution-parameters” of a low substitution CES aggregate production function as time-varying weights, such that technical change corresponds to a decrease in labor’s weight, along with an increase in capital’s. This “direction” of shift is considered a natural outcome of the fact that ideas are embedded within capital. As capital’s weight tends to one, changes in it become increasingly negligible and balanced-growth is attained. Thus the proposed non-neutral mechanism is asymptotically equivalent to Harrod-neutrality. But during industrialization, when capital grows faster than output, its “dis-augmentation” is still significant; the result being constant factor-shares. This resolves a recent controversy regarding the measurement of TFP growth, specifically in East Asian NICs. The capital-using aspect of factors’ replacement, along with the limited degree of factor substitution, also lead to time-ranked “appropriate-technologies”, which are broadly consistent with under-development; despite the lack of non-convexities.

Keywords: Mechanization; Non-Neutral Technical Change; Dis-Augmentation; CES (search for similar items in EconPapers)
JEL-codes: E25 O11 O14 O33 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2006-06
New Economics Papers: this item is included in nep-dev, nep-mac and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://degit.sam.sdu.dk/papers/degit_11/C011_028.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to degit.sam.sdu.dk:80 (No such host is known. )

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:deg:conpap:c011_028

Access Statistics for this paper

More papers in DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade Contact information at EDIRC.
Bibliographic data for series maintained by Jan Pedersen ().