Abstract: "The Steady-State Growth Theorem: Understanding Uzawa (1961)"
This note revisits the proof of the Steady-State Growth Theorem, .rst given by Uzawa in 1961. We provide a clear statement of the theorem and a new version of Uzawa's proof that makes the intuition underlying the result more apparent. For example, in the special case of factor-augmenting technical change, i.e. Yt = F(BtKt;AtLt), the effective inputs BK and AL must grow at the same rate in steady state; otherwise trends in the factor shares are induced. The fact that effective inputs must .balance. suggests a new interpretation of balanced growth. Because capital accumulates and therefore inherits the trend in AL, the balance condition implies that technical change must be purely labor augmenting.