Introduction to Modern Economic Growth production function and the resource constraint Consequently, the result is a very powerful one Before providing a more economic intuition for this result, let us state an immediate implication of this proposition as a corollary, which will be useful both in the discussions below and for the intuition: Corollary 2.3 Under the assumptions of Proposition 2.11, if an economy has an asymptotic path with constant growth of output, capital and consumption, then asymptotically technological progress can be represented as Harrod neutral (purely labor augmenting) The intuition for Proposition 2.11 and for the corollary is simple We have assumed that the economy features capital accumulation in the sense that gK +δ > From the aggregate resource constraint, this is only possible if output and capital grow at the same rate Either this growth rate is equal to the rate of population growth, n, in which case, there is no technological change (i.e., the proposition applies with g = 0), or the economy exhibits growth of per capita income and capital-labor ratio The latter case creates an asymmetry between capital and labor, in the sense that capital is accumulating faster than labor Constancy of growth then requires technological change to make up for this asymmetry–that is, technology to take a labor-augmenting form This intuition does not provide a reason for why technology should take this labor-augmenting (Harrod-neutral) form, however The proposition and its corollary simply state that if technology did not take this form, and asymptotic path with constant growth rates would not be possible At some level, this is a distressing result, since it implies that balanced growth (in fact something weaker than balanced growth) is only possible under a very stringent assumption It also provides no reason why technological change should take this form Nevertheless, in Chapter 15, we will see that when technology is endogenous, the intuition in the previous paragraph also works to make technology endogenously more labor-augmenting than capital augmenting Notice also that this proposition does not state that technological change has to be labor augmenting all the time Instead, it requires that technological change 86