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Micro-foundation for a constant elasticity of substitution production function through mechanization

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  • Nakamura, Hideki
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    Abstract

    We consider an increase in the range of capital use as a form of mechanization. A constant elasticity of substitution (CES) production function is dynamically derived from Leontief production functions through the endogenous complementary relationship between capital accumulation and mechanization. This implies that a CES production function can be resolved into technological change that does not involve changes in total factor productivity. Furthermore, using the normalizing procedure of the CES production function developed by de La Grandville [de La Grandville, O., 1989. In quest of the Slutsky diamond. American Economic Review 79, 468-481], we investigate how mechanization is related to the elasticity of substitution in our endogenous growth model.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Macroeconomics.

    Volume (Year): 31 (2009)
    Issue (Month): 3 (September)
    Pages: 464-472

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    Handle: RePEc:eee:jmacro:v:31:y:2009:i:3:p:464-472

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    Web page: http://www.elsevier.com/locate/inca/622617

    Related research

    Keywords: Mechanization Dynamic changes in production functions Micro-foundation for a CES production function Total factor productivity;

    References

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    1. de La Grandville, Olivier, 1989. "In Quest of the Slutsky Diamond," American Economic Review, American Economic Association, vol. 79(3), pages 468-81, June.
    2. Olivier de La Grandville & Rainer Klump, 2000. "Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions," American Economic Review, American Economic Association, vol. 90(1), pages 282-291, March.
    3. Klump, Rainer & Preissler, Harald, 2000. " CES Production Functions and Economic Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 41-56, March.
    4. Paul Romer, 1991. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
    5. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1091-1117, November.
    6. Subodh Kumar & R. Robert Russell, 2002. "Technological Change, Technological Catch-up, and Capital Deepening: Relative Contributions to Growth and Convergence," American Economic Review, American Economic Association, vol. 92(3), pages 527-548, June.
    7. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
    9. Kaz Miyagiwa & Chris Papageorgiou, 2003. "Elasticity of substitution and growth: normalized CES in the Diamond model," Economic Theory, Springer, vol. 21(1), pages 155-165, 01.
    10. Chris Papageorgiou & Kaz Miyagiwa, . "Endogenous Aggregate Elasticity of Substitution," Departmental Working Papers 2006-06, Department of Economics, Louisiana State University.
    11. Young, Alwyn, 1994. "Lessons from the East Asian NICS: A contrarian view," European Economic Review, Elsevier, vol. 38(3-4), pages 964-973, April.
    12. de La Grandville, Olivier, 1989. "Erratum [In Quest of the Slutsky Diamond]," American Economic Review, American Economic Association, vol. 79(5), pages 1307, December.
    13. Charles I. Jones, 2004. "The Shape of Production Function and the Direction of Technical Change," NBER Working Papers 10457, National Bureau of Economic Research, Inc.
    14. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
    15. Joseph Zeira, 2006. "Machines as Engines of Growth," DEGIT Conference Papers c011_059, DEGIT, Dynamics, Economic Growth, and International Trade.
    16. Winford H. Masanjala & Chris Papageorgiou, 2004. "The Solow model with CES technology: nonlinearities and parameter heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(2), pages 171-201.
    17. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
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    Cited by:
    1. Jakub Growiec, 2011. "A Microfoundation for Normalized CES Production Functions with Factor-Augmenting Technical Change," DEGIT Conference Papers c016_013, DEGIT, Dynamics, Economic Growth, and International Trade.
    2. Jakub Growiec, 2012. "Factor-Augmenting Technology Choice and Monopolistic Competition," DEGIT Conference Papers c017_038, DEGIT, Dynamics, Economic Growth, and International Trade.

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