Hostname: page-component-59f8fd8595-p59nl Total loading time: 0 Render date: 2023-03-22T01:20:01.354Z Has data issue: true Feature Flags: { "useRatesEcommerce": false } hasContentIssue true


Published online by Cambridge University Press:  27 June 2016

Andreas Irmen*
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:


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.

Copyright © Cambridge University Press 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


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.



Acemoglu, D. (2003) Labor- and capital-augmenting technical change. Journal of the European Economic Association 1 (1), 137.CrossRefGoogle Scholar
Acemoglu, D. (2009) Introduction to Modern Economic Growth. Princeton, NJ: Princeton University Press.Google Scholar
Aghion, P. and Howitt, P. (1992) A model of growth through creative destruction. Econometrica 60 (2), 323351.CrossRefGoogle Scholar
Barro, R.J. and Sala-í-Martin, X. (2004) Economic Growth, 2nd ed. Cambridge, MA: MIT Press.Google Scholar
Drandakis, E.M. and Phelps, E.S. (1966) A model of induced invention, growth, and distribution. Economic Journal 76, 823840.CrossRefGoogle Scholar
Duffy, J. and Papageorgiou, C. (2000) A cross-country empirical investigation of the aggregate production function specification. Journal of Economic Growth 5 (1), 87120.CrossRefGoogle Scholar
Funk, P. (2002) Induced Innovation Revisited. Economica 69, 155171.CrossRefGoogle Scholar
Grossman, G.M. and Helpman, E. (1991) Innovation and Growth in the Global Economy. Cambridge, MA: MIT Press.Google Scholar
Harrod, R.F. (1937) Review of Joan Robinson's Essays in the Theory of Employment. Economic Journal 47, 326330.CrossRefGoogle Scholar
Irmen, A. (2011) Steady-state growth and the elasticity of substitution. Journal of Economic Dynamics and Control 35 (8), 12151228.CrossRefGoogle Scholar
Irmen, A. (2013) A Generalized Steady-State Growth Theorem. CESifo Working Paper No. 4477, CESifo Group Munich.Google Scholar
Irmen, A. (2017) Capital- and Labor-Saving Technical Change in an Aging Economy. International Economic Review, forthcoming.Google Scholar
Irmen, A. and Tabaković, A. (2015) Endogenous Capital- and Labor-Augmenting Technical Change in the Neoclassical Growth Model. CESifo Working Paper No. 5643, CESifo Group Munich.Google Scholar
Jones, C.I. (2005) The shape of production functions and the direction of technical change. Quarterly Journal of Economics 120 (2), 517549.Google Scholar
Jones, C.I. and Scrimgeour, D. (2008) A new proof of Uzawa's steady-state growth theorem. Review of Economics and Statistics 90 (1), 180182.CrossRefGoogle Scholar
Karabarbounis, L. and Neiman, B. (2014) The global decline of the labor share. Quarterly Journal of Economics 129 (1), 61103.CrossRefGoogle Scholar
Kennedy, C. (1964) Induced bias in innovation and the theory of distribution. Economic Journal 74, 541547.CrossRefGoogle Scholar
Klump, R., McAdam, P., and Willman, A. (2007) Factor substitution and factor augmenting technical progress in the US: A normalized supply-side system approach. Review of Economics and Statistics 89 (1), 183192.CrossRefGoogle Scholar
Piketty, T. (2014) Capital in the Twenty-First Century. Cambridge, MA: Harvard University Press.CrossRefGoogle ScholarPubMed
Robinson, J. (1938) The classification of inventions. Review of Economic Studies 5 (2), 139142.CrossRefGoogle Scholar
Romer, P.M. (1990) Endogenous technological change. Journal of Political Economy 98 (5), S71S102.CrossRefGoogle Scholar
Samuelson, P. (1965) A theory of induced innovation along Kennedy–Weisäcker lines. Review of Economics and Statistics 47 (3), 343356.CrossRefGoogle Scholar
Samuelson, P. (1966) Rejoinder: Agreements, disagreements, doubts, and the case of induced Harrod-Neutral technical change. Review of Economics and Statistics 48 (4), 444448.CrossRefGoogle Scholar
Schlicht, E. (2006) A variant of Uzawa's theorem. Economics Bulletin 5 (6), 15.Google Scholar
Solow, R.M. (1956) A contribution to the theory of economic growth. Quarterly Journal of Economics 70 (1), 6594.CrossRefGoogle Scholar
Solow, R.M. (1970) Foreword. In Burmeister, Edwin and Dobell, Rodney A. (eds.), Mathematical Theories of Economic Growth, pp. viiix. London: Collier-Macmillian.Google Scholar
Swan, T.W. (1956) Economic growth and capital accumulation. Economic Record 32, 334361.CrossRefGoogle Scholar
Uzawa, H. (1961) Neutral inventions and the stability of growth equilibrium. Review of Economic Studies 28 (2), 117124.CrossRefGoogle Scholar
vonWeizsäcker, C.C. (1962) A New Technical Progress Function. mimeo, MIT; published in German Economic Review (2010) 11, 248265.CrossRefGoogle Scholar