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Comment on Acemoglu “Labor- and Capital-augmenting technical change”

Author

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  • Li, Defu
  • Bental, Benjamin
  • Tang, Xuemei

Abstract

Acemoglu’s (2003) paper “Labor- and Capital-augmenting Technical Change” is a pioneering work that introduces a growth model with an endogenous direction of technical progress including microfoundations. At the steady-state equilibrium, the model indicates that there is only net labor-augmenting technical change, despite firms being able to pursue both labor- and capital-augmenting technological improvements. While this paper is a classic and original contribution to the field, it presents several significant shortcomings: (1) substantial mathematical errors in the proof of the main propositions; (2) the absence of a dynamic adjustment function for scientists across different innovation sectors, which is critical for the model; (3) neglect of the crucial condition required for the propositions to hold; (4) omission of important policy implications that diverge from existing literature; and (5) insufficient explanation of the intuition behind the model’s core conclusions. This comment identifies and addresses these shortcomings.

Suggested Citation

  • Li, Defu & Bental, Benjamin & Tang, Xuemei, 2024. "Comment on Acemoglu “Labor- and Capital-augmenting technical change”," MPRA Paper 123070, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:123070
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    References listed on IDEAS

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    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. H. Uzawa, 1961. "Neutral Inventions and the Stability of Growth Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 28(2), pages 117-124.
    3. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, March.
    4. David Cass, 1965. "Optimum Growth in an Aggregative Model of Capital Accumulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(3), pages 233-240.
    5. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
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    More about this item

    Keywords

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    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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