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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. Young, Alwyn, 1994. "Lessons from the East Asian NICS: A contrarian view," European Economic Review, Elsevier, vol. 38(3-4), pages 964-973, April.
    2. Kaz Miyagiwa & Chris Papageorgiou, 2007. "Endogenous Aggregate Elasticity of Substitution," Emory Economics 0707, Department of Economics, Emory University (Atlanta).
    3. de La Grandville, Olivier, 1989. "Erratum [In Quest of the Slutsky Diamond]," American Economic Review, American Economic Association, vol. 79(5), pages 1307, December.
    4. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
    5. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
    6. Klump, Rainer & Preissler, Harald, 2000. " CES Production Functions and Economic Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 41-56, March.
    7. Francesco Caselli & Wilbur John Coleman II, 2000. "The World Technology Frontier," NBER Working Papers 7904, National Bureau of Economic Research, Inc.
    8. 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.
    9. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1091-1117, November.
    10. Chris Papageorgiou & Kaz Miyagiwa, . "Elasticity of Substitution and Growth: Normalized CES in the Diamond Model," Departmental Working Papers 2001-05, Department of Economics, Louisiana State University.
    11. 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.
    12. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
    13. 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.
    14. de La Grandville, Olivier, 1989. "In Quest of the Slutsky Diamond," American Economic Review, American Economic Association, vol. 79(3), pages 468-81, June.
    15. Joseph Zeira, 2006. "Machines as Engines of Growth," DEGIT Conference Papers c011_059, DEGIT, Dynamics, Economic Growth, and International Trade.
    16. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
    17. 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.
    18. 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. Temple, Jonathan, 2012. "The calibration of CES production functions," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 294-303.
    2. Growiec, Jakub, 2013. "A microfoundation for normalized CES production functions with factor-augmenting technical change," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2336-2350.
    3. Growiec, Jakub, 2013. "Factor-augmenting technology choice and monopolistic competition," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 86-94.

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