A Cross-Country Estimation of the Elasticity of Substitution between Labor and Capital in Manufacturing Industries
AbstractThis paper presents a simple methodology to estimate the elasticity of substitution between labor and capital for firms operating in perfectly competitive markets with CRS production functions. It is applied in a cross-country sample to 28 3-digit ISIC manufacturing industries. The econometric procedure relies on measures of sectorial capital stock, that are estimated for a sample of more than 30 countries. Unlike older studies, the estimates are consistent with hicks-neutral cross-country technology differences. The results reveal that in most industries the elasticity of substitution is smaller than one, rejecting the null hypothesis of Cobb-Douglas production functions. The paper provides then an estimation of ¾LK at a level of aggregation extremely useful for research in the international trade literature.
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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 226.
Date of creation: 2002
Date of revision:
Publication status: Published as "A Cross-Country Estimation of the Elasticity of Substitution between Labor and Capital in Manufacturing Industries", Cuadernos de Economía, Vol. 40, Nº 120, pp. 239-257, 2003.
Other versions of this item:
- Sebastián Claro, 2003. "A Cross-Country Estimation of the Elasticity of Substitution between Labor and Capital in Manufacturing Industries," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(120), pages 239-257.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- D20 - Microeconomics - - Production and Organizations - - - General
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
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