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A Nonparametric Examination of Capital-Skill Complementarity

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  • Henderson, Daniel J.

    (University of Alabama)

Abstract

This paper uses nonparametric kernel methods to construct observation-specific elasticities of substitution for a balanced panel of 73 developed and developing countries to examine the capital-skill complementarity hypothesis. The exercise shows some support for capital-skill complementarity, but the strength of the evidence depends upon the definition of skilled labor and the elasticity of substitution measure being used. The added flexibility of the nonparametric procedure is also able to uncover that the elasticities of substitution vary across countries, groups of countries and time periods.

Suggested Citation

  • Henderson, Daniel J., 2008. "A Nonparametric Examination of Capital-Skill Complementarity," IZA Discussion Papers 3865, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3865
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    Cited by:

    1. Jakub Growiec & Anna Pajor & Dorota Gorniak & Artur Predki, 2015. "The shape of aggregate production functions: evidence from estimates of the World Technology Frontier," Bank i Kredyt, Narodowy Bank Polski, vol. 46(4), pages 299-326.
    2. Battisti, Michele & Gatto, Massimo Del & Parmeter, Christopher F., 2022. "Skill-biased technical change and labor market inefficiency," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    3. M. Battisti & M. Del Gatto & A. F. Gravina & C. F. Parmeter, 2021. "Robots versus labor skills: a complementarity/substitutability analysis," Working Paper CRENoS 202104, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    4. Battisti, Michele & Gravina, Antonio Francesco, 2021. "Do robots complement or substitute for older workers?," Economics Letters, Elsevier, vol. 208(C).
    5. Xue, Jianpo & Yip, Chong K., 2013. "Aggregate elasticity of substitution and economic growth: A synthesis," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 60-75.
    6. Mallick, Debdulal, 2012. "The role of the elasticity of substitution in economic growth: A cross-country investigation," Labour Economics, Elsevier, vol. 19(5), pages 682-694.
    7. Kai Sun, 2015. "Constrained nonparametric estimation of input distance function," Journal of Productivity Analysis, Springer, vol. 43(1), pages 85-97, February.
    8. Wang, Le, 2013. "Estimating returns to education when the IV sample is selective," Labour Economics, Elsevier, vol. 21(C), pages 74-85.
    9. Chassamboulli, Andri & Palivos, Theodore, 2013. "The impact of immigration on the employment and wages of native workers," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 19-34.
    10. Chris Papageorgiou & Marianne Saam, 2008. "Two‐level CES Production Technology in the Solow and Diamond Growth Models," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(1), pages 119-143, March.

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    More about this item

    Keywords

    capital-skill complementarity; nonparametric kernel; stochastic dominance; elasticity of substitution;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D2 - Microeconomics - - Production and Organizations

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