What do you understand by technical progress? What is the relationship between technical
progress and growth of total factor productivity? Discuss the various conceptions of neutral
technical progress as put forward by Hicks, Harrod and Solow.
Answers
Answer:
Technical progress plays an imperative role in influencing the pace of economic growth. It is the technical change which results in an increased output per unit labour. It signifies a comprehensive phenomenon and, therefore, denote different things in different contexts.
Technical change refers to change in the production function embodying all techniques.
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Thus, technical change in the context of economic development must result in more output for the same resources or the same amount of output. It could occur following a change in any of the production variables. Thus, it may result due to a change in kinds of physical capital, in the quality of labour or even in the organisation of these resources.
Harrod-Dommar model is based on the assumption of fixed coefficients of production and gives rise to the knife edge problem. Kendrick, Kaldor and Solow and others have been the most consistent critics of this approach who have tried to demonstrate the role of technological changes in the growth of an economy.
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A technical change is said to be neutral if it is neither capital saving nor labour saving i.e. it is neutral in its effect in the sense that neither of the two factors become more or less important at the margin. There are two definitions of neutrality. One is given by Prof. Hicks and the other by Prof. Harrod.
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