Rainer Klump
- 16 February 2011
- WORKING PAPER SERIES - No. 1294Details
- Abstract
- The elasticity of substitution between capital and labor and, in turn, the direction of technical change are critical parameters in many fields of economics. Until recently, though, the application of production functions with non-unitary substitution elasticities (i.e., non Cobb Douglas) was hampered by empirical and theoretical uncertainties. As has recently been revealed,
- JEL Code
- C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes
E23 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Production
E25 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Aggregate Factor Income Distribution
O30 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→General
O51 : Economic Development, Technological Change, and Growth→Economywide Country Studies→U.S., Canada
- 9 June 2004
- WORKING PAPER SERIES - No. 367Details
- Abstract
- Using a normalized CES function with factor-augmenting technical progress, we estimate a supply-side system of the US economy from 1953 to 1998. Avoiding potential estimation biases that have occurred in earlier studies and putting a high emphasis on the consistency of the data set, required by the estimated system, we obtain robust results not only for the aggregate elasticity of substitution but also for the parameters of labor and capital augmenting technical change. We find that the elasticity of substitution is significantly below unity and that the growth rates of technical progress show an asymmetrical pattern where the growth of laboraugmenting technical progress is exponential, while that of capital is hyperbolic or logarithmic.
- JEL Code
- C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes
E23 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Production
E25 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Aggregate Factor Income Distribution
O30 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→General
O51 : Economic Development, Technological Change, and Growth→Economywide Country Studies→U.S., Canada
- 1 October 2003
- WORKING PAPER SERIES - No. 280Details
- Abstract
- Recent empirical studies on the inflation-growth-relationship underline that inflation has negative growth effects already under relatively modest rates. Most contributions to monetary growth theory, however, have difficulties in explaining such a pattern. It is shown in this paper that this problem can be overcome by establishing a link between monetary instability and the aggregate elasticity of factor substitution. Several microeconomic justifications can be found for a negative influence of inflation on factor substitution. It turns out that already in a simple neoclassical monetary growth model this effect is usually strong enough to question the superneutrality benchmark result in the steady state and to dominate all potential positive effects of inflation along the convergence path. In a more general perspective the paper contributes to a better integration of institutional change in aggregate models of economic growth.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
O11 : Economic Development, Technological Change, and Growth→Economic Development→Macroeconomic Analyses of Economic Development
O41 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→One, Two, and Multisector Growth Models