Harrod-neutral Technical Progress Research Articles

Measuring Total Factor Productivity in General Technical Progress Framework

The classical Solow's total factor productivity accounting assumes that technical progress is Hicks neutral, which is a special situation in the reality of world economy. This paper expands the setting of technical progress into general technical progress framework, which can cover Hicks neutral technical progress, Harrod neutral technical progress, Solow-neutral technical progress, and various factor-biased technical changes. According to the principle of statistical index number, this paper decomposes the output index into a total factor input index and a total factor productivity index, and adopts normalized CES production function with factor-augmenting technical progress to derive the calculation formulas of the total factor input index and the total factor productivity index, and constructs a new economic growth accounting system, and finds the counteraction and compensation mechanism for diminishing marginal returns. If the factor substitution elasticity is 1 or there is no technical progress bias and factor allocation bias, then the new accounting equation degenerates into the classic Solow growth accounting equation. The new accounting system can measure the influence of total factor input and total factor productivity to economic growth, but also can measure the influences of factor input intensity and factor allocation bias in the growth rate of total factor input, and the influences of technical progress intensity and technical progress bias in the growth rate of total factor productivity. Therefore it is more precise and accurate than classical method.

Harrod-Neutral Technical Progress and Fluke Switch Points

This article considers Harrod-neutral technical progress in the context of an analysis of the choice of technique. In a model of the production of commodities by means of commodities, neutral technical change is compatible with the reswitching of techniques, capital reversing, process recurrence, and the reverse substitution of labor. A taxonomy of fluke switch points is applied to an example, illustrating how these phenomena can arise and vanish in the course of neutral technical progress.

Fiscal policy within a common currency area – growth implications in the light of neoclassical theory

We examine the long-run impact of fiscal policy on economic growth under the conditions of an economic and monetary union (EMU). The analysis is based on the neoclassical growth model of a small (in economic terms) open economy in an EMU. The core assumptions are perfect capital mobility, which results in identical interest rates across the EMU, and perfect mobility of goods, which leads to the convergence of price levels. The model is based on standard neoclassical assumptions, i.e., the output is determined by the Cobb-Douglas production function with a Harrodneutral technical progress and constant returns to scale, capital and labor receive their marginal products, etc. We show that a unique long-run equilibrium exists and is characterized by the socalled natural rate of growth. The necessary and sufficient conditions of global asymptotic stability form a system of three non-trivial inequalities. We argue that in modern economies, these conditions are satisfied, except perhaps for very short periods of time. Furthermore, we show that the golden rules of fiscal policy have the form of an alternative optimal policy that crucially depends on the relation between the real interest rate and the natural rate of growth and on the relations between five other autonomous parameters.

The Elasticity of Substitution and Characteristics of New Investments

Changes in the interest rate and the capital cost will influence important characteristics of investments, such as the expected life time, the factor intensity and the factor productivity of new capital goods. When Harrod-neutral technical progress is endogenous and variable, an increased interest rate will lower the lifetime as well as the factor intensity of the capital good in the Cobb-Douglas case, while there will be a reversed outcome when the substitutability between factor inputs is low. The latter outcome can be interpreted in terms of a reswitching process, that is, one identical factor intensity can arise at two different factor price ratios.

Optimal Growth with Endogenous Technical Progress: Hicksian Bias in a Macro Model

If productivity growth is endogenous, the question of whether to allocate some resources to increase the efficiency of capital needs to be examined in spite of the conventional wisdom that only Harrod-neutral technical progress is compatible with the steady state. This paper describes the crucial role that the production technology and research sectors play in determining the allocation of resources for accumulating physical capital and enhancing the productivity of inputs. We develop a model of biased growth, where, even in the steady state, the efficiency of capital and labour are increasing due to the allocation of resources to the research sector. JEL Classification Numbers: C62, O31.

Transferts intergénérationnels: Étude dans une petite économie ouverte

We consider an overlapping generations model of small open economy with Harrod neutral technical progress. If the interest rate is less than the growth rate, intergenerational public transfers increase welfare of some generations and reduce welfare of others. Then, we consider a central planner who maximises an intertemporal social welfare function defined as a discounted sum of generational utilities. In many cases, the optimal path entails a new repartition of technical progress between generations. More precisely, the optimal growth rate of consumptions could be higher or lower than technical progress growth rate. If it's lower, first generations benefits of a technical progress that occurs in the future. This entails an important borrowing which have to be returned by transfers from the young to the old. These transfers grow permanently and, in long run, become higher than wages. On the other hand, if optimal consumptions and technical progress growth rates are equal, intergenerational transfers that allow a decentralization of the optimal path can be from the young to the old or the old to the young.

Efficiency wages and economic growth

This paper examines the positive and normative implications of introducing efficiency wages into a standard growth model. A number of useful findings are obtained under the empirically justifiable assumption that the elasticity of substitution between capital and labor is less than unity. It is shown that an increase in thrift shifts downward the whole path of equilibrium unemployment to leave it permanently lower in the new steady state. A level increase in the measure of, as well as an increase in the rate of Harrod-neutral technical progress, are contractionary for equilibrium employment. The market economy underinvests.

Non-Steady-State Economic Growth in a Two-Sector World

This paper discusses the asymptotic behavior of the neoclassical two-sector growth model when the steady-state conditions are not fulfilled, and derives the asymptotic growth rates for cases in which Hicks neutral technical progress occurs in the investment sector, or Harrod neutral technical progress occurs at different rates in the two sectors. The last section compares the asymptotic properties of this model with the standard steady-state properties of the two-sector growth model. IN THE EIGHTEEN YEARS following the publication of Professor Solow's classic one-sector model [8], much work has been done in attempting to explain the stylized facts of growth by means of aggregate models. However, almost without exception, these models have concentrated on analyzing the properties of the steady-state equilibrium, ignoring the behavior of the economy should a steady state fail to exist. Even those models that have implicitly dealt with the singularity of the steady-state solution2 have done so by attempting to explain why the steady state should occur (for example, Kennedy [5] and Chang [4]), rather than by explaining the non-steady-state properties of their models. In this paper we shall study the behavior of a two-sector economy in which the steady-state conditions are not fulfilled. Our analysis will follow, for the most part, the technique developed by Vanek [12 and 13] and extended by Bertrand and Vanek [2]. In these papers the authors study the behavior of the aggregate capitallabor ratio in a one-sector model in which the steady-state condition is not fulfilled. However, they do not explicitly discuss the asymptotic behavior of the economy, nor do they contrast the asymptotic behavior of the non-steady-state economy to those characteristics attributed to the steady-state world. It is the purpose of this paper to examine both of these issues for a two-sector growth model.3

More on Putty-Clay

THE SEEMING INTRACTABILITY of many of the relationships in the putty-clay model (where machines embody the technology of their date of construction, there is a choice of techniques at the moment of new investment, but once a machine is built there is no scope for altering its labor requirement) has come in the way of any extensive analysis of this model which is otherwise very rich in implications that most of the usual growth models lack. In an excellent paper Bliss [4] despaired of deriving meaningful comparative-dynamic propositions in this model because he was unable to prove (a) the uniqueness of a net present-value maximizing competitive equilibrium and (b) the uniqueness of growth equilibrium for a given gross saving ratio. Bardhan [3] and Britto [5] have, however, proved (a) under the none-too-restrictive sufficient condition that the ex ante production function has an elasticity of substitution, a, that does not exceed unity. Under the same sufficient condition, Bardhan [3] has proved' (b) and, as a direct corollary, the inverse comparative-dynamic relationship between the rate of interest, r, and the gross saving ratio, s. All this has now made it somewhat easier to derive interesting comparativedynamic propositions (under the above-mentioned sufficient condition) in the model, some of which we report in this paper: (i) It is now well-known2 that the equilibrium with a higher rate of interest, r, will have a longer economic life of capital, T, (i.e., dT/dr > 0) if a is near zero, and a shorter life of capital (i.e., dT/dr < 0) if a is near or equal to unity; but the sign of dT/dr is generally regarded as indeterminate when a is significantly different3 from both zero and unity. It is proved in this paper that dT/dr is always positive as long as a is not above 2/3. This reduces our zone of ignorance, although does not quite eliminate it. This also implies that when a does not exceed 2/3, the equilibrium with a higher group saving ratio, s, has also a larger wage share in gross output. (ii) For a given rate of interest, a higher rate of embodied Harrod-neutral technical progress, g, implies a shorter economic life of capital (i.e., aT/ag < 0). The same is true even if the rate of interest is not given, but what is given is only the gross-saving ratio (which is assumed not to exceed its golden rule value) and that the ex ante production function is Cobb-Douglas. This result in the Cobb-Douglas putty-clay case is in contrast with the clay-clay case of

Hicks- and Harrod-Neutral Technical Progress and the Relative Stability of a Two-Sector Growth Model with Fixed Coefficients

Relative stability in a two-sector, two-factor model of economic growth requires that, if capital stock is growing faster (slower) than labor, the system should operate in such a way as to reduce (increase) the rate of growth of capital, so that it may approach, in the limit, the given rate of growth of labor. Assuming full utilization of capacity, full employment of the exogenously growing labor force, and fixed production coefficients in both sectors, Shinkai (1960) has shown that an economy is relatively stable only if the consumption-goods sector is capital intensive relative to the capital-goods sector. If the consumption-goods sector is labor intensive relative to the capital-goods sector, the capital stock grows (declines) exponentially along with a cumulative decline (rise) in the output of the consumption-goods sector, so that, eventually, the condition of full employment of factors breaks down (see Corden 1966). Introducing Hicks-neutral technical progress, Findlay (1967) has shown that the condition for relative stability remains unscathed only if technical progress occurs in the consumption-goods sector. Findlay, however, does not explore the consequences of technical progress when capital goods are capital intensive relative to consumption goods. Moreover, he considers only the effects of Hicks-neutral technical progress. The purpose of this paper is to examine the implications for relative stability of both Hicksand Harrod-neutral technical progress. Furthermore, the consequences of technical progress are determined for both the case in which capital goods are capital intensive and the case in which they are labor intensive.

The Role of the Jacobian Determinant in the Two-Sector Model

As PROFESSOR HAHN has written, two-sector growth story has been unwinding slowly and is not always easy to read. [6, :339)]. The confusion has been compounded by the fact that the literature contains some false and/or misleading theorems. One of my goals, therefore, is to state clearly the most important theorems concerning cautsality ;uniqueness of short-run equilibrium' and stability which have appeared in numerous other papers (e. g., [5], [7], [8], [11], [14] and [15]). I have found it convenient to depart from the usual approaches and to introduce the Jacobian determinant J of the entire system of simultaneous equations which determine short-run equilibrium, and I have shown that the two-sector model is causal if and only if J does not change sign. Theorem 5 provides necessary and sufficient conditions for local stabilit-, a problemn which has been somewhat neglected in previous work: a numerical example is given to illustrate that local stabilit:y is sometimes sufficient for the stronger conclusion that there exists a u(nique balanced groN-th path. Finally, global stability and Harrod-neutral technical progress are discussed briefly.