Factor substitution and factor augmenting technical progress in the US: a normalized supply-side system approach
AbstractUsing 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 Classification: C22, E23, E25, O30, O51
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Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 0367.
Date of creation: Jun 2004
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Other versions of this item:
- Rainer Klump & Peter McAdam & Alpo Willman, 2004. "Factor Substitution and Factor Augmenting Technical Progress in the US: A Normalized Supply-Side System Approach," DEGIT Conference Papers c009_030, DEGIT, Dynamics, Economic Growth, and International Trade.
- 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, Employment, and Investment - - - Production
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-05 (All new papers)
- NEP-INO-2005-10-10 (Innovation)
- NEP-MAC-2005-10-06 (Macroeconomics)
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