In a classic paper, Acemoglu (2003) developed a growth model where firms can undertake both labor- and capital-augmenting technological improvements. According to that paper the balanced growth path with purely labor-augmenting technical change is the unique asymptotic (noncycling) equilibrium,...

The history of modern economic growth indicates that technical change is not only purely labor-augmenting, but also skill biased the 20th century. Although there are papers that have separately analyzed why technical change be purely labor-augmenting or skill biased, there is no paper analyzing...

The neoclassical Euler equation provides the necessary conditions for households to maximize lifetime utility by allocating income between consumption and investment, and is the core equation for solving the steady-state of the neoclassical growth model. The existing textbooks (Barro and...

Technological progress relates not only to its rate but also to its direction and bias. The rate has been analyzed by the endogenous technical change models and the bias has been analyzed by the directed technical change model, but the determinants of the direction has not been uncovered yet....

This paper proposes a transactions cost theory of total factor productivity. In a world with asymmetric information and transactions costs, effort, and thus productivity, must be induced by incentive schemes. Labor contracts trade off the marginal benefits and the marginal costs of effort. The...

By extending the range of admissible factor accumulation and innovation investment elasticities, this paper expands the Acemoglu (2003) model and obtains several results. First, it identifies conditions for the existence of a steady-state equilibrium and shows that Uzawa’s theorem is obtained...

Improving the efficiency either in the process of factor accumulation or in the process of production of final output is often considered as a main driving force for the sustainable growth of modern economies. However, this article proves that for the most important input, physical capital,...

What are the key determinants of the direction of technological progress is of central importance for many problems in macroeconomics. In the existing literature, the changing relative production factor prices as suggested by Hicks (1932) and the relative market sizes as indicated by Acemoglu...

Identifying the key factors determiningthe direction of technological progress is of central importance for macroeconomics.This paper develops a framework based on Acemoglu(2002,2003) in which profit-maximizing firms undertake both labor- and capital-augmenting technological improvements. It...

The article is concerned with understanding the impact of social preferences and wealth inequality on aggregate economic outcomes. We investigate how different manifestations of other-regarding preferences affect incentive contracts at the microeconomic level and how these in turn translate into...