Growth with Endogenous Direction of Technical Change

Defu Li () and Benjamin Bental

MPRA Paper from University Library of Munich, Germany

Abstract: By extending the range of admissible factor accumulation and innovation investment elasticities, this paper expands the Acemoglu (2003) model and obtains several results. First, it identifies conditions for the existence of a steady-state equilibrium and shows that Uzawa’s theorem is obtained as a special case of these conditions. Second, it demonstrates that along a steady-state equilibrium path, technological progress can include both labor-augmenting and capital-augmenting elements. Third, it shows that the direction of technological progress is determined by the relative size of price elasticities of material factors, and is biased towards the factor with the relatively smaller price elasticity. Finally, the paper finds that technical change has two effects on factor income shares. On one hand, factor shares change when the direction of technical progress changes. On the other hand, when the direction of technical change remains unchanged, in general the speed of technical progress also affects factor shares, unless technical progress is Hicks neutral.

Keywords: steady-state; technical change; Uzawa’s theorem; investment elasticities; price elasiticities; factor income shares (search for similar items in EconPapers)
JEL-codes: E13 O11 O33 Q01 (search for similar items in EconPapers)
Date: 2015-01-29
New Economics Papers: this item is included in nep-gro and nep-mac
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