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Schlicht, Ekkehart (17. March 2014): Directed Technical Change and Capital Deepening: A Reconsideration of Kaldor’s Technical Progress Function. Discussion Papers in Economics 2014
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Abstract

This note proposes a growth model that is derived from the standard Solow growth model by replacing the neoclassical production function with Kaldor’s technical progress function while maintaining a marginalist theory of factor prices in the spirit suggested by von Weizsäcker (1966, 1966b). The hybrid model so obtained accounts for balanced growth in a way that appears less arbitrary than the Solow model, especially because it directly accounts for Harrod neutral technical change, without any need for further assumptions.