Technical Progress, Productivity Growth and Steady States

Abstract

In nearly all the steady states described in the last three chapters output grows at the same rate as the labour force, so that the productivity of labour is constant. The only exception arose in Section 5.4, where we showed that steady growth with rising output per head is a possibility when there are increasing returns to scale; but there are problems with that conception, as we saw. Otherwise — with constant returns — in the absence of technological change steady growth necessarily entails constant output per head; and rising output per head is a non-steady-state phenomenon, associated with rising capital-output and capital-labour ratios, i.e. capital-deepening. To explain steady growth with rising income per head — which is what Kaldor’s stylised facts refer to — our neoclassical models need technical progress.