The Neoclassical Approach to Induced Technical Change: From Hicks to Acemoglu

This survey article provides a critical overview of the development of the neoclassical theory of induced technical change. From Hicks's introduction of the concept in his Theory of Wages up to the recent literature the strengths and weaknesses of the proposed models and the contexts in which they have been developed are outlined. It is shown that induced technical change has been invoked to explain various long‐run distribution conundrums which could not be explained with standard neoclassical growth theory. The importance of induced technical change for the long‐run distribution of income cannot be doubted. Nevertheless, we show that neoclassical models of induced technical change are still unsatisfactory in a number of respects.