Introduction to Modern Economic Growth 2.6.2 Types of Neutral Technological Progress What are some convenient special forms of the general production function F [K (t) , L (t) , A (t)]? First we could have F [K (t) , L (t) , A (t)] = A (t) F˜ [K (t) , L (t)] , for some constant returns to scale function F˜ This functional form implies that the technology term A (t) is simply a multiplicative constant in front of another (quasi-) production function F˜ and is referred to as Hicks-neutral after the famous British economist John Hicks Intuitively, consider the isoquants of the function F [K (t) , L (t) , A (t)] in the L-K space, which plot combinations of labor and capital for a given technology A (t) such that the level of production is constant This is shown in Figure 2.12 Hicks-neutral technological progress, in the first panel, corresponds to a relabeling of the isoquants (without any change in their shape) Another alternative is to have capital-augmenting or Solow-neutral technological progress, in the form F [K (t) , L (t) , A (t)] = F˜ [A (t) K (t) , L (t)] This is also referred to as capital-augmenting progress, because a higher A (t) is equivalent to the economy having more capital This type of technological progress corresponds to the isoquants shifting with technological progress in a way that they have constant slope at a given labor-output ratio and is shown in the second panel of Figure 2.12 Finally, we can have labor-augmenting or Harrod-neutral technological progress, named after an early influential growth theorist Roy Harrod, who we encountered above in the context of the Harrod-Domar model previously: F [K (t) , L (t) , A (t)] = F˜ [K (t) , A (t) L (t)] This functional form implies that an increase in technology A (t) increases output as if the economy had more labor Equivalently, the slope of the isoquants are constant along rays with constant capital-output ratio, and the approximate shape of the isoquants are plotted in the third panel of Figure 2.12 Of course, in practice technological change can be a mixture of these, so we could have a vector valued index of technology A (t) = (AH (t) , AK (t) , AL (t)) and 82