Hicks Neutral Technical Change Revisited: CES Production Function and Information of General Order
Topics in Macroeconomics
In this paper, I show that Hicks neutral technical change is identified as the information of order sigma obtained if the distribution of factor prices is replaced by the distribution of factor efficiency parameters. Together with Solow's residual, the information method enables us to distinguish between the neutral and non neutral part of technical and organizational changes. An empirical evaluation of both methods is provided using Jorgenson's (2001) US data for the period 1948-1999. The main
... 1948-1999. The main results of the paper are that i) both neutral and non neutral technical change have occurred in the US in the period 1948-1999 and ii) 3/4th of the productivity slowdown observed in the 70s and 80s is due to a deceleration in the contribution of non neutral technical changes. KEYWORDS: neutral and non neutral technical change, Solow's residual, information of general order * The author thanks Michael Sattinger, the Editor John Leahy and two anonymous referees for helpful comments on earlier drafts of this paper. Corresponding address.