Technical Progress Function

DEFINITION of 'Technical Progress Function'

An economic relation which seeks to explain changes in the level of economic output in terms of the level of technical progress. Rather than looking at economic growth as a form of efficiently allocating inputs, the technical progress function explains economic growth in terms of investment in technological progress.

BREAKING DOWN 'Technical Progress Function'

The production function assumes that, given a preset level of technical progress, output is explained by the level of efficiency by which labor and capital are allocated to production. A technical progress function looks at this production the other way around. Given that inputs are allocated most efficiently, then the technical progress function assets that output is dependent on the level of technical progress. Thus, the greater the level of investment in technical progress over time, the greater the amount of output in the economy.

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