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A Generalized Growth Model and the Direction of Technological Progress

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  • Li, Defu
  • Bental, Benjamin

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.

Suggested Citation

  • Li, Defu & Bental, Benjamin, 2019. "A Generalized Growth Model and the Direction of Technological Progress," MPRA Paper 96509, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:96509
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    File URL: https://mpra.ub.uni-muenchen.de/96509/1/MPRA_paper_96509.pdf
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    References listed on IDEAS

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    1. Quamrul Ashraf & Oded Galor, 2011. "Dynamics and Stagnation in the Malthusian Epoch," American Economic Review, American Economic Association, vol. 101(5), pages 2003-2041, August.
    2. William D. Nordhaus, 1973. "Some Skeptical Thoughts on the Theory of Induced Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 87(2), pages 208-219.
    3. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
    4. Andreas Irmen, 2013. "Adjustment costs in a variant of Uzawa's steady-state growth theorem," Economics Bulletin, AccessEcon, vol. 33(4), pages 2860-2873.
    5. repec:wsi:wschap:9789813209398_0001 is not listed on IDEAS
    6. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    7. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    8. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1055-1089.
    9. repec:eee:jetheo:v:170:y:2017:i:c:p:346-384 is not listed on IDEAS
    10. H. Uzawa, 1961. "Neutral Inventions and the Stability of Growth Equilibrium," Review of Economic Studies, Oxford University Press, vol. 28(2), pages 117-124.
    11. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, March.
    12. Irmen, Andreas & Tabaković, Amer, 2017. "Endogenous capital- and labor-augmenting technical change in the neoclassical growth model," Journal of Economic Theory, Elsevier, vol. 170(C), pages 346-384.
    13. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 517-549.
    14. Ryuzo Sato & Rama Ramachandran, 2000. "Optimal Growth with Endogenous Technical Progress: Hicksian Bias in a Macro Model," The Japanese Economic Review, Japanese Economic Association, vol. 51(2), pages 193-206, June.
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    More about this item

    Keywords

    Economic Growth; Direction of Technological Progress; Returns to Scale; Factor Supply Elasticities; Uzawa’s Steady-State Theorem; Industrial Revolution;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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