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Uncovering the Link Between the Theoretical and Probabilistic Models of the Global Production Function: A Copula Approach

Author

Listed:
  • Armando Sánchez-Vargas

    (National Autonomous University of Mexico)

  • José Manuel Márquez-Estrada

    (National Autonomous University of Mexico)

  • Eric Hernández-Ramírez

    (National Autonomous University of Mexico)

Abstract

We provide micro foundations for the global production function (GPF) based on the standard microeconomic model, and we develop a parallel probabilistic model with similar properties. The theoretical and probabilistic models of the GPF are integrated in the context of a technology choice problem. We construct a primitive, named the augmented transformation function, to obtain a GPF and its associated joint distribution that includes the output and labor-saving and capital-saving technological innovations. This type of primitive allows us not only to derive the theoretical GPF but also to consistently build a link between the substitutability microparameters (elasticities) and the probabilistic parameters (correlations). We find that the shape of the GPF is determined by all the relations among technological innovations and output and the way they are combined.

Suggested Citation

  • Armando Sánchez-Vargas & José Manuel Márquez-Estrada & Eric Hernández-Ramírez, 2023. "Uncovering the Link Between the Theoretical and Probabilistic Models of the Global Production Function: A Copula Approach," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 21(2), pages 289-315, June.
    • Handle: RePEc:spr:jqecon:v:21:y:2023:i:2:d:10.1007_s40953-023-00342-1
    DOI: 10.1007/s40953-023-00342-1
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    References listed on IDEAS

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    More about this item

    Keywords

    Global production function; Labor-saving and capital-saving technological innovations; Copula base models; Elasticity of substitution; Kendall’s tau correlation coefficient;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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