Definition of Capital-Augmenting: Capital-augmenting is one of the ways in which an effectiveness variable could be included in a production function in a Solow model. If effectiveness A is multiplied by capital K but not by labor L, then we say the effectiveness variable is capital-augmenting.
For example, in the model of output Y where Y=(AK)aL1-a the effectiveness variable A is capital-augmenting but in the model Y=AKaL1-a it is not.
Another example would be a capital utilization variable as measured say by electricity usage. (E.g., as in Eichenbaum).
An example: in the context of a railroad, automatic railroad signaling, track-switching, and car-coupling devices are capital-augmenting. From Moses Abramovitz and Paul A. David, 1996. "Convergence and Deferred Catch-up: productivity leadership and the waning of American exceptionalism." In Mosaic of Economic Growth, edited by Ralph Landau, Timothy Taylor, and Gavin Wright. (Econterms)
Terms related to Capital-Augmenting:
- Capital consumption
- Capital deepening
- Capital intensity
- Capital ratio
- Capital structure
- Human capital
- Social capital
- Solow model
Books on Capital-Augmenting:
- Romer, David. 1996. Advanced Macroeconomics. McGraw-Hill.
<Return to Main Page>