Solow: Technical Change and the Aggregate Production Function

Solow, Robert M. (1957). Technical Change and the Aggregate Production Function (Vol. 39, 312-320): The MIT Press.

This article begins by declaring the fundamentally crucial role of production functions in long-term modeling. However, Solow is now here to simply espouse the benefits of these functions, but to add to them: “The new wrinkle I want to describe is an elementary way of segregating variations in output per head due to technical change from those due to changes in the availability of capital per head” (312).

Solow’s aggregate production function relies on constant returns to scale. He spends much of his paper constructing and justifying this formula. He then explores the production function for American from 1909-49. From this data, he is able to ascertain a few trends: technical change was neutral, the upward shift in the function increased over time, output doubled and that the function gives the impressions of diminishing returns.