Comment on Acemoglu “Labor- and Capital-augmenting technical change”

Acemoglu’s (2003) paper “Labor- and Capital-augmenting Technical Change” is a pioneering work that introduces a growth model with an endogenous direction of technical progress including microfoundations. At the steady-state equilibrium, the model indicates that there is only net labor-augmenting technical change, despite firms being able to pursue both labor- and capital-augmenting technological improvements. While this paper is a classic and original contribution to the field, it presents several significant shortcomings: (1) substantial mathematical errors in the proof of the main propositions; (2) the absence of a dynamic adjustment function for scientists across different innovation sectors, which is critical for the model; (3) neglect of the crucial condition required for the propositions to hold; (4) omission of important policy implications that diverge from existing literature; and (5) insufficient explanation of the intuition behind the model’s core conclusions. This comment identifies and addresses these shortcomings.