A Framework for Economic Growth with Capital-Embodied Technical Change
Benjamin F. Jones, Xiaojie Liu
American Economic Review · 2024 · Volume 114 · Issue 5
Abstract
Technological advance is often embodied in capital inputs, like computers, airplanes, and robots. This paper builds a framework where capital inputs advance through (i) increased automation and (ii) increased productivity. The interplay of these two innovation dimensions can produce balanced growth, satisfying the Uzawa Growth Theorem even though technological progress is capital-embodied. The framework can further address structural transformation, general-purpose technologies, the limited macroeconomic impact of computing, and declining productivity growth and labor shares. Overall, this tractable framework can help resolve puzzling tensions between micro-level observations of innovation and balanced growth while providing new perspectives on numerous macroeconomic phenomena.
Keywords
Investment, Capital, Intangible Capital, Capacity, Macroeconomics: Production, Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital, Aggregate Labor Productivity, Aggregate Factor Income Distribution, Industrial Organization and Macroeconomics: Industrial Structure and Structural Change, Industrial Price Indices, Technological Change: Choices and Consequences, Diffusion Processes, One, Two, and Multisector Growth Models
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