Land in Fellner's Model of Economic Growth: Comment
In a recent article in this Review, William Fellner explored the implications of the neoclassical theory of economic growth for the measurement of technological change. His model assumed two inputs, capital and labor, and constant returns to scale. Fellner speculated that capital and land are readily substitutable, and hence no separate rent category of income, or land category of inputs, need be provided. It is the purpose of this note to demonstrate that when land is introduced explicitly as a factor of production in a model with factor-augmenting technological change, it can be dealt with in a way that validates Fellner's model as regards the capital and labor interactions; but moreover the introduction of land as a separate factor of production contributes to the predictivity of the model by resolving, at least in part, a criticism of neoclassical growth theory made by B. Frey. A Constant Elasticity of Substitution (CES) production function for three factors of production adequate to the purpose of this paper may be written
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