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LoginWhy in most macro models technology is labor-augmenting?
General Tech Technology & Software 3 years ago
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manpreet![Tuteehub forum best answer]()
Best Answer
3 years ago
Take Romer's advanced macro book as reference. In it the Solow model,the Ramsey model and the Diamond OLG all contain the fundamental AtAt variable representing technological progress.
In all these models, technology affects only labor, that is:
Yt=F(Kt,AtLt)Yt=F(Kt,AtLt)
Now my question is why is such assumption so prevalent in these models. It seems to me that when we imagine technology as affecting output we think of the Northrop loom, the Bessemer steel, the container, the railroad. You know, stuff. All these seem to me to be mostly capital-augmenting technologies.
So why do we tend to assume labor-augmenting technology instead?