Introduction to Modern Economic Growth has to be labor augmenting asymptotically, i.e., along the balanced growth path This is exactly the pattern that certain classes of endogenous-technology models will generate Finally, it is important to emphasize that Proposition 2.11 does not require that Y ∗ (t) = F˜ [K ∗ (t) , A (t) L (t)], but only that it has a representation of the form Y ∗ (t) = F˜ [K ∗ (t) , A (t) L (t)] This allows one important exception to the statement that “asymptotically technological change has to be Harrod neutral” If the aggregate production function is Cobb-Douglas and takes the form Y (t) = [AK (t) K (t)]α [AL (t)L(t)]1−α , then both AK (t) and AL (t) could grow asymptotically, while maintaining balanced growth However, in this Cobb-Douglas example we can define A (t) = [AK (t)]α/(1−α) AL (t) and the production function can be represented as Y (t) = [K (t)]α [A(t)L(t)]1−α In other words, technological change can be represented as purely labor augmenting, which is what Proposition 2.11 requires Intuitively, the differences between laboraugmenting and capital-augmenting (and other forms) of technological progress matter when the elasticity of substitution between capital and labor is not equal to In the Cobb-Douglas case, as we have seen above, this elasticity of substitution is equal to 1, thus different forms of technological progress are simple transforms of each other Another important corollary of Proposition 2.11 is obtained when we also assume that factor markets are competitive Corollary 2.4 Under the conditions of Proposition 2.11, if factor markets are competitive, then asymptotic factor shares are constant, i.e., as t → ∞, αL (t) → α∗L and αK (t) → α∗K 87