A Framework for Economic Growth with Capital-Embodied Technical Change

Benjamin F. Jones and Xiaojie Liu

American Economic Review, 2024, vol. 114, issue 5, 1448-87

Abstract: Technological advance is often embodied in capital inputs, like computers, airplanes, and robots. This paper builds a framework where capital inputs advance through (i) increased automation and (ii) increased productivity. The interplay of these two innovation dimensions can produce balanced growth, satisfying the Uzawa Growth Theorem even though technological progress is capital-embodied. The framework can further address structural transformation, general-purpose technologies, the limited macroeconomic impact of computing, and declining productivity growth and labor shares. Overall, this tractable framework can help resolve puzzling tensions between micro-level observations of innovation and balanced growth while providing new perspectives on numerous macroeconomic phenomena.

JEL-codes: E22 E23 E24 E25 L16 O33 O41 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/aer.20221180

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