How capital intensity affects technical progress: An empirical analysis for 17 advanced economies

In this paper we present a model of economic growth with endogenous technical progress. We test if the neoclassical accepts assumption that capital intensity affects Total Factor Productivity (TFP) in long run. Our view takes inspiration from Kaldor's 1957 which Technical Progress Function (TPF) responds to joint behavior and inventiveness. find “movements along production function cannot be distinguished shifts function” as formalized by TPF. The is tested using Structural VAR for 17 advanced economies, over period 1980–2020. On impact, when improves, TFP increases sharply. This response large persistent time explains about half much measured TFP. It confirms an omitted variable traditional scheme used estimate Notably, standard not consistent evidence. analysis also shows demand shocks can have permanent effects on output unemployment. Finally, monetary policy helps stabilize business cycle, but loses its effectiveness