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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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    File URL: https://mpra.ub.uni-muenchen.de/123070/1/MPRA_paper_123070.pdf
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    References listed on IDEAS

    as
    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

    Acemoglu， Endogenous technical change， Direction of technical change， Balanced Growth Path; Relative income share of factors， Dynamic system;

    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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