Labor- and Capital- Augmenting Technical Change

25 Pages Posted: 8 May 2000 Last revised: 14 Aug 2021

See all articles by Daron Acemoglu

Daron Acemoglu

Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

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Date Written: February 2000

Abstract

I analyze an economy in which profit-maximizing firms can undertake both labor- or capital-augmenting technological improvements. In the long run, the economy looks like 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. A range of policies may have counterintuitive implications due to their effect on the direction of technical change. For example, taxes on capital income reduce the labor share in the short run, but increase it in the medium/long run.

Suggested Citation

Acemoglu, Daron, Labor- and Capital- Augmenting Technical Change (February 2000). Available at SSRN: https://ssrn.com/abstract=215748

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