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Growth with Endogenous Direction of Technical Change

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  • LI, Defu
  • Bental, Benjamin

Abstract

By extending the range of admissible factor accumulation and innovation investment elasticities, this paper expands the Acemoglu (2003) model and obtains several results. First, it identifies conditions for the existence of a steady-state equilibrium and shows that Uzawa’s theorem is obtained as a special case of these conditions. Second, it demonstrates that along a steady-state equilibrium path, technological progress can include both labor-augmenting and capital-augmenting elements. Third, it shows that the direction of technological progress is determined by the relative size of price elasticities of material factors, and is biased towards the factor with the relatively smaller price elasticity. Finally, the paper finds that technical change has two effects on factor income shares. On one hand, factor shares change when the direction of technical progress changes. On the other hand, when the direction of technical change remains unchanged, in general the speed of technical progress also affects factor shares, unless technical progress is Hicks neutral.

Suggested Citation

  • LI, Defu & Bental, Benjamin, 2015. "Growth with Endogenous Direction of Technical Change," MPRA Paper 64124, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:64124
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    References listed on IDEAS

    as
    1. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
    2. Ben R. Craig & William E. Jackson & James B. Thomson, 2004. "On SBA-guaranteed lending and economic growth," Working Papers (Old Series) 0403, Federal Reserve Bank of Cleveland.
    3. Growiec, Jakub, 2010. "Knife-edge conditions in the modeling of long-run growth regularities," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1143-1154, December.
    4. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    5. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1055-1089.
    6. 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.
    7. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 517-549.
    8. Li, Defu & Huang, Jiuli, 2014. "Uzawa(1961)’s Steady-State Theorem in Malthusian Model," MPRA Paper 55329, University Library of Munich, Germany.
    9. Christiaans, Thomas, 2004. "Types of balanced growth," Economics Letters, Elsevier, vol. 82(2), pages 253-258, February.
    10. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, March.
    11. Andreas Irmen, 2013. "Adjustment costs in a variant of Uzawa's steady-state growth theorem," Economics Bulletin, AccessEcon, vol. 33(4), pages 2860-2873.
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    13. 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

    steady-state; technical change; Uzawa’s theorem; investment elasticities; price elasiticities; factor income shares;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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