Technical Progress and Outputs under Variable Returns to Scale.

This paper analyzes the implications of three types of technical progress on outputs in a variable returns-to-scale framework. It is shown that Hicks-ne utral technical improvement is ultra-biased in production regardless of the direction and severity of the returns to scale. The output eff ect of intensive-factor-saving technical progress is more ultra-biase d (relative to neutral progress) regardless of the industrial pattern of returns to scale. These results may break down if the system unde r variable returns to scale is unstable. Intensive-factor-using techn ical progress, however, may have any output effect. Copyright 1987 by The Review of Economic Studies Limited.