The technological progress of the Solow model has a new variable of labor efficiency, which assumes that technological progress augments labor and increases labor efficiency at an exogenous rate (Lerner, 1952). In addition, the technological progress of the Solow model starts with a stable returns to scale production function Y = f (K, L).

L is the number of effective workers and an increase in labor efficiency has a similar effect on output and an increase in labor force (Frhr, 2007).

Y is output per effective worker while k is capital per effective worker. This means that the production function per effective worker is y= f (k) as indicated in the graph.

This implies that by multiplying every input by some factor “t”, the output varies by a multiple of that same factor: tY  = f ( t K, tL). In this case, let t = 1/L. This translates to Y * 1/L = f (K * 1/L, L * 1/L) or Y/L = f (K/L, 1). y = Y/L and k = K/L, which means that the production function per effective is y = f (k) as shown in the graph. (Frhr, 2007).

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