A Microfoundation for Production Functions: Assignment of Heterogenous Workers to Heterogenous Jobs
AbstractIn very different fields of economics, economic inference and policy evaluation require economists to parametrize a production function that links measures of input factors to measures of output. While doing so, strong assumptions are implicitly made about microeconomic variables governing the shape of the aggregate production function. In this paper, I develop an assignment model that provides a microeconomic foundation for aggregate production functions. The shape of the production function depends crucially on the distribution of workers and jobs and the type of technological changes depends crucially on the evolution of these distributions. Sufficient and necessary conditions are provided for the production function to be of the Constant Ratio of Elasticities of Substitution form, a form nesting the broadly used Constant Elasticity of Substitution form. This model provides a way to evaluate how stringent assumptions about the type of production function or technological change are by comparing the implied distribution of jobs and its evolution over time to observations of the distribution of jobs and its evolution over time.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3312.
Length: 30 pages
Date of creation: Jan 2008
Date of revision:
Publication status: published in: Economica, 2012, 79 (315), 534-556.
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Other versions of this item:
- Arnaud Dupuy, 2012. "A Microfoundation for Production Functions: Assignment of Heterogeneous Workers to Heterogeneous Jobs," Economica, London School of Economics and Political Science, vol. 79(315), pages 534-556, 07.
- D2 - Microeconomics - - Production and Organizations
- D3 - Microeconomics - - Distribution
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
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- Vladimir Matveenko, 2013. "Resources, Institutions And Technologies: Game Modeling Of Dual Relations," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 9(3), pages 7-28.
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