Harrod-Neutral Technical Progress

Harrod-Neutral Technical Progress

Improvements in technology that increase the efficiency of labor. That is, harrod-neutral technical progress allows producers to make more with less. This generally results in lower expenses and, on a large scale, it can spur economic growth. However, it can also cause unemployment by making employees with certain skills unnecessary.
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It augments the neoclassical growth model to incorporate Harrod-neutral technical progress and a public sector input that enters productively into private sector production.
The reason we have worked with Harrod-neutral technical progress is that we want to have a model which has a steady state that is consistent with the broad stylized facts of growth.
We adopt Weil's (1989) set-up of infinitely-lived households extended by Harrod-neutral technical progress.
Productivity growth and public sector employment
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