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A GENERALIZED STEADY-STATE GROWTH THEOREM

Published online by Cambridge University Press:  27 June 2016

Andreas Irmen
Andreas Irmen*
Affiliation:
CREA, University of Luxembourg, and CESifo, Munich
*
Address correspondence to: Andreas Irmen, CREA, University of Luxembourg, Faculty of Law, Economics and Finance, 162a, avenue de la Faïencerie, L-1511 Luxembourg, Luxembourg; e-mail: [email protected].
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Abstract

Is there an economic justification for why technical change is by assumption labor-augmenting in dynamic macroeconomics? The literature on the endogenous choice of capital- and labor-augmenting technical change finds that technical change is purely labor-augmenting in steady state. The present paper shows that this finding is mainly an artifact of the underlying mathematical models. To make this point, Uzawa's steady-state growth theorem is generalized to a neoclassical economy that, besides consumption and capital accumulation, uses current output to create technical progress or to manufacture intermediates. The generalized steady-state growth theorem is shown to encompass four models of endogenous capital- and labor-augmenting technical change and the typical model of the induced innovations literature of the 1960s.

Keywords

Steady-State GrowthCapital AccumulationUzawa's TheoremEndogenous Direction of Technical Change
Type
Articles
Information
Macroeconomic Dynamics , Volume 22 , Issue 4 , June 2018 , pp. 779 - 804
Copyright
Copyright © Cambridge University Press 2016 

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Footnotes

This paper is a revised and extended version of my CESifo Working Paper Irmen (2013). Financial support from the University of Luxembourg under the program “Agecon C - Population Aging: An Exploration of its Effect on Economic Performance and Culture” is gratefully acknowledged. I would like to thank two anonymous referees, Anastasia Litina, Amer Tabaković, Gautam Tripathi, Bertrand Wigniolle, and Benteng Zou for helpful comments.

References

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