A Generalized Growth Model and the Direction of Technological Progress

Defu Li () and Benjamin Bental

MPRA Paper from University Library of Munich, Germany

Abstract: Based on a general growth model, this paper finds that the steady-state direction of technological progress is determined by the scale return of the production function and the relative factor supply elasticities. A specific version of that model extends Acemoglu (2002) to provide the underlying determinants of the supply elasticities and demonstrates that the relative price (Hicks, 1932) and relative market size (Acemoglu, 2002) have only a short-term impact on the direction of technological progress. A consequence of the analysis is that the steady-state technological progress is purely labor-augmenting (i.e. delivers Uzawa’s steady-state theorem) if and only if the scale return of the production function is constant and the supply elasticity of capital is infinite. Analogously, an infinite labor supply elasticity is required if labor-augmenting technological progress is to be excluded prior to the Industrial Revolution. Accordingly, changing factor supply elasticities may have induced the Industrial Revolution.

Keywords: Economic Growth; Direction of Technological Progress; Returns to Scale; Factor Supply Elasticities; Uzawa’s Steady-State Theorem; Industrial Revolution (search for similar items in EconPapers)
JEL-codes: E13 E25 O33 O41 (search for similar items in EconPapers)
Date: 2019-10-13
New Economics Papers: this item is included in nep-gro and nep-mac
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