Which of the following growth models is most closely

Solution

Understanding Embodied vs. Disembodied Technical Change

• Disembodied Technical Change: This refers to progress that is not tied to any specific factor of production. It is like "manna from heaven" that makes all existing capital and labor more productive simultaneously. In the standard Solow Model , technical change is typically represented as a shift in the production function, Y = A(t) f(K, L), affecting all K regardless of its age.
• Embodied Technical Change: This occurs when new technology can only be utilized through the introduction of new capital equipment. Older machines do not benefit from the new technology; only the "latest vintage" of capital carries the improvement.

• Technical change is a byproduct of experience in the production of capital goods.
• Crucially, this knowledge is embodied in the design of new machinery.
• As the economy accumulates more gross investment, it "learns" how to make better machines. Therefore, the productivity of the economy is linked to the vintage of its capital stock.

• Solow-Swan (A): Primarily treats technical change as exogenous and disembodied (though Solow later wrote on "vintage capital" models, his primary 1956 framework is disembodied).
• Romer (C): While Romer endogenizes technology through R&D, his 1990 model usually treats "blueprints" or "ideas" as a stock of knowledge (A) that increases the productivity of all intermediate goods sectors, making it closer to a disembodied (or knowledge-spillover) framework.
• Lucas (D): Focuses on the accumulation of human capital (H). While skills are "embodied" in people, the term "embodied technical change" in growth literature specifically refers to the link between technology and physical capital (machinery).