Advanced Search
MyIDEAS: Login

Factor Substitution and Factor Augmenting Technical Progress in the US: A Normalized Supply-Side System Approach

Contents:

Author Info

  • Rainer Klump
  • Peter McAdam
  • Alpo Willman

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 labor-augmenting technical progress is exponential, while that of capital is hyperbolic or logarithmic.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.degit.ifw-kiel.de/papers/degit_09/C009_030.pdf
Download Restriction: no

Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c009_030.

as in new window
Length: 54 pages
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:deg:conpap:c009_030

Contact details of provider:
Postal: Hindenburgufer 66, D-24105 Kiel
Phone: +49 431 8814-206
Fax: +49 431 85853
Email:
Web page: http://www.degit.ifw-kiel.de/
More information through EDIRC

Related research

Keywords: Capital-Labor Substitution; Technological Change; Factor Shares; Normalized CES function; Supply-side system; United States.;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Norbert Berthold & Rainer Fehn & Eric Thode, 2002. "Falling Labor Share and Rising Unemployment: Long-Run Consequences of Institutional Shocks?," German Economic Review, Verein für Socialpolitik, vol. 3(4), pages 431-459, November.
  2. Samuel Bentolila & Gilles Saint-Paul, 2003. "Explaining Movements in the Labor Share," The B.E. Journal of Macroeconomics, De Gruyter, vol. 0(1), pages 9.
  3. E. Yndgaard & Palle S. Andersen & Marc Klau, 1999. "Higher profits and lower capital prices: is factor allocation optimal?," BIS Working Papers 65, Bank for International Settlements.
  4. Ripatti, Antti & Vilmunen, Jouko, 2001. "Declining labour share – Evidence of a change in underlying production technology?," Research Discussion Papers 10/2001, Bank of Finland.
  5. Berndt, Ernst R, 1976. "Reconciling Alternative Estimates of the Elasticity of Substitution," The Review of Economics and Statistics, MIT Press, vol. 58(1), pages 59-68, February.
  6. Charles I. Jones, 2003. "Growth, capital shares, and a new perspective on production functions," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  7. Ricardo J. Caballero & Mohamad L. Hammour, 1997. "Jobless Growth: Appropriability, Factor Substitution, and Unemployment," NBER Working Papers 6221, National Bureau of Economic Research, Inc.
  8. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  9. Rowthorn, Robert, 1999. "Unemployment, Wage Bargaining and Capital-Labour Substitution," Cambridge Journal of Economics, Oxford University Press, vol. 23(4), pages 413-25, July.
  10. 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.
  11. Alan J. Auerbach, 2003. "Fiscal Policy, Past and Present," NBER Working Papers 10023, National Bureau of Economic Research, Inc.
  12. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  13. Palle Schelde Andersen & Mark Klau & Ebbe Yndgaard, . "Higher Profits and Lower Capital Prices: Is Factor Allocation Optimal?," Economics Working Papers 1999-2, School of Economics and Management, University of Aarhus.
  14. McAdam, Peter & Willman, Alpo, 2004. "Production, supply and factor shares: an application to estimating German long-run supply," Economic Modelling, Elsevier, vol. 21(2), pages 191-215, March.
  15. Kaas, Leo & von Thadden, Leopold, 2001. "Unemployment, Factor Substitution, and Capital Formation," Discussion Paper Series 1: Economic Studies 2001,01, Deutsche Bundesbank, Research Centre.
  16. repec:fth:prinin:413 is not listed on IDEAS
  17. W. Bolt & P.J.A. van Els, 2000. "Output Gap and Inflation in the EU," DNB Staff Reports (discontinued) 44, Netherlands Central Bank.
  18. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, 03.
  19. Alan Krueger, 1999. "Measuring Labor's Share," Working Papers 792, Princeton University, Department of Economics, Industrial Relations Section..
  20. Costas Azariadis, 1996. "The Economics of Poverty Traps Part One: Complete Markets," Working Papers 9606, Centro de Investigacion Economica, ITAM.
  21. Klump, Rainer & Preissler, Harald, 2000. " CES Production Functions and Economic Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 41-56, March.
  22. Lewis, Philip E. T. & Kirby, Michael G., 1988. "A new approach to modelling the effects of incomes policies," Economics Letters, Elsevier, vol. 28(1), pages 81-85.
  23. Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1, April.
    • Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1, April.
  24. 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.
  25. Robert S. Chirinko, 2002. "Corporate Taxation, Capital Formation, and the Substitution Elasticity between Labor and Capital," CESifo Working Paper Series 707, CESifo Group Munich.
  26. Chirinko, Robert S. & Fazzari, Steven M. & Meyer, Andrew P., 1999. "How responsive is business capital formation to its user cost?: An exploration with micro data," Journal of Public Economics, Elsevier, vol. 74(1), pages 53-80, October.
  27. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  28. Alpo Willman, 2002. "Euro area production function and potential output: a supply side system approach," Working Paper Series 153, European Central Bank.
  29. Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531.
  30. Easterly, William & Fischer, Stanley, 1995. "The Soviet Economic Decline," World Bank Economic Review, World Bank Group, vol. 9(3), pages 341-71, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:deg:conpap:c009_030

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michaela Rank).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.