Abstract
Based on the CES model by Arrow et al., this paper incorporates the hypothesis of induced innovation, takes household and firm behavior as subjects, and analyzes the effects of biased technical progress on factor shares with endogenous growth. The results show that, if substitution elasticity s more than 1, the factor-augmenting model generates endogenous growth; if saving rate is constant, and technical progress s Harrod neutral, there is a saddle path, capital share remains constant and technical progress is biased to capital; if savings rate is not a constant, nor technical progress Harrod neutral, then there is still a saddle path, but equilibrium point is half equilibrium point, and the bias turns towards labor. It is also found that when innovation possibility frontier is symmetric, capital share is less than 1/2, and long run factor shares are consistent with the theory.
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