A new model of technical change and an application to the Solow model

Mehdi Senouci (1) , Hugo Mauron (2)

1 LGI - Laboratoire Génie Industriel
2 CentraleSupélec

We present an alternative form of technical change within the traditional two-input framework. The aggregate production function is the convex hull of an increasing, finite number of Leontief production functions. At each date, each of these local production functions mutates into two Leontief production functions: one featuring exogenously increased labor-augmenting productivity, the other featuring exogenously increased capital-augmenting productivity. We embed this model of technical change into an otherwise standard, discrete-time Solow model. We do not specify technical change as purely labor-augmenting; still, it comes out that this modified Solow model has a globally stable balanced growth path. Along this path, technical change jointly determines the growth rate, capital-output ratio, and marginal productivity of capital and the competitive factor shares.

Mots clés: Directed technical change; Uzawa theorem; Balanced growth path; Solow model

Domaines: Economies et finances

Mehdi Senouci, Hugo Mauron. A new model of technical change and an application to the Solow model. 2020. ⟨hal-02919860⟩