1. In class, we discuss two quite different approaches to modeling technical change in long-run growth. The conventional approach, described in Ch. 2 of Jones and Vollrath, assumes that technical

change is "purely labor augmenting” (i.e., Harrod neutral). The approach that we discussed in class assumes that technical change is Hick neutral also known as “invention neutral." Assume a Cobb-Douglas production technology, can be represented as either: Y = K (AL)¹-a(Harrod-neutral)(1) Y = AKⓇL¹-a(Hicks-neutral)(2) The necessary requirement for the Solow steady state is constant factor-income shares. This condition can be satisfied in either of two ways: A. Balanced growth of the factor inputs, i.e., the growth of the capital stock, g = g + ga, the-growth of the effective supply of labor, or B. A unitary K-L supply elasticity, i.e., o= 1. Letting the physical supply of the labor force be fixed, i.e., g = 0 (only to simplify the problem, not-alter its logic): a. Show how the Harrod-neutral version satisfies condition A. b. Show how the Hick-neutral version requires condition B. c. What is the implication for the generalized representation of technical change in the Solowmodel? Explain.