This volume develops original methods of analyzing biased technological progress in the theory
and empirics of economic growth and income distribution. Motivated by sharp increases in wage
and income inequalities in the world since the beginning of the new century many
macroeconomists have begun to realize the importance of biased technological changes. However
the comprehensive explanations have not yet appeared. This volume analyzes the effects of
factor-biased technological progress on growth and income distribution and shows that long-run
trends of the capital-income ratio and capital share of income consistent with Piketty's 2014
empirical results emerge. Incorporating the modified version of induced innovation theory into
the standard neoclassical growth model it also explains the long-run fluctuations of growth
and income distribution consistent with the data shown in Piketty. Introducing a wage-setting
function the neoclassical growth model is modified to account for unemployment as well as to
examine the dynamics of unemployment and the labor share of income under biased technological
progress. Applying a new econometric method to Japanese industrial data the authors test the
key assumptions employed and important results derived in the theoretical part of this book.
