Labor- and Capital-Augmenting Technical Change
46 Pages Posted: 22 Jan 2003
Date Written: December 2002
I analyze an economy in which firms can undertake both labor- and capital-augmenting technological improvements. In the long run, the economy resembles the standard growth model with purely labor-augmenting technical change, and the share of labor in GDP is constant. Along the transition path, however, there is capital-augmenting technical change and factor shares change. Tax policy and changes in labor supply or savings typically change factor shares in the short run, but have no or little effect on the long-run factor distribution of income.
Keywords: Economic Growth, Endogenous Growth, Factor Shares, Technical Change
JEL Classification: O33, O14, O31, E25
Suggested Citation: Suggested Citation