Endogenous technical change in alternative theories of growth and distribution

This paper surveys the last two and a half decades of non-neoclassical literature on endogenous technical change and the functional income distribution. We distinguish between classical-Marxian and post-Keynesian models, and analyze them under three different assumptions on the determinants of technical change: capital accumulation, income distribution, and labor market tightness. The balanced growth implications of alternative models are compared with neoclassical exogenous and endogenous growth theories. Despite the strong differences in the assumptions regarding the substitutability between capital and labor, the role of different classes in society, and whether or not productive factors are fully employed, the various alternative models can be classified in a way that highlights remarkable similarities with their neoclassical counterparts. Both neoclassical and alternative theories of endogenous growth: (i) have shown that long-run growth is sensitive to investment decisions, and (ii) rely on a linear spillover from the stock of knowledge to the production of innovations. The comparison highlights the different channels emphasized by competing theories: saving behavior and market structure in the neoclassical theories, as opposed to income distribution, the state of the labor market, and investors’ behavior in alternative theories.