Biased Technical Change and the Aggregate Production Function

Colgate Univ. Econ. Discussion Paper 96-08

Posted: 20 Jan 1997

See all articles by Thomas R. Michl

Thomas R. Michl

Colgate University; The Levy Economics Institute

Date Written: September 1996

Abstract

This paper develops a model of biased technical change in the Ricardo-Marx tradition in which capital-labor substitution occurs as a partially irreversible historical process. The world described by the model would appear to an unsuspecting economist to be well-described by a neoclassical model with a Cobb-Douglas production function. However, its trajectory in wage-profit space will lie along a displaced and distorted image of the factor price frontier generated by the neoclassical model. This can explain why the output elasticity of capital exceeds the profit share in most empirical studies.

JEL Classification: O47, E11

Suggested Citation

Michl, Thomas R., Biased Technical Change and the Aggregate Production Function (September 1996). Colgate Univ. Econ. Discussion Paper 96-08, Available at SSRN: https://ssrn.com/abstract=3663

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The Levy Economics Institute

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