Factor-eliminating technical change

• We study economic growth through eliminating rather than augmenting non-reproducible factors.
• We obtain the balanced growth path and complete transition dynamics in market equilibrium.
• The singularity restriction required for growth is an endogenous and intuitive outcome.
• Several testable and sometimes unexpected implications receive support from the data.

Perpetual growth requires offsetting diminishing returns to reproducible factors of production. In this article we present a theory of factor elimination. For simplicity and clarity, there is no augmentation of non-reproducible factors, thus excluding the standard engine of growth. By spending resources on R&D, agents learn to change the exponents of a Cobb–Douglas production function. We obtain the economy's balanced growth path and complete transition dynamics. The theory provides a mechanism for the transition from an initial technology incapable of supporting perpetual growth to one with constant returns to reproducible factors that supports it.