This paper investigates into the consequences of sector-speci c technological progress in a two-sector, optimal growth model. In accordance with existing theory, we find that consumption-specifi c Hicks-neutral technical shocks increase consumption but leave other parameters unchanged. Hicks-neutral, investment-specifi c technical shocks increase the wage-rental ratio, and increase steady-state consumption by a factor equal to the macroeconomic ratio of capital share to labor share. If the elasticity of substitution is equal to one in the long run, the growth regime with only investment-specifi c technical change is sustainable and asymptotically balanced.
