The Shape of Production Function and the Direction of Technical Change
AbstractThis paper views the standard production function in macroeconomics as a reduced form and derives its properties from microfoundations. The shape of this production function is governed by the distribution of ideas. If that distribution is Pareto, then two results obtain: the global production function is Cobb-Douglas, and technical change in the long run is labor-augmenting. Kortum (1997) showed that Pareto distributions are necessary if search-based idea models are to exhibit steady-state growth. Here we show that this same assumption delivers the additional results about the shape of the production function and the direction of technical change.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10457.
Date of creation: May 2004
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Publication status: published as Jones, Charles I. "The Shape Of Production Functions And The Direction Of Technical Change," Quarterly Journal of Economics, 2005, v120(2,May), 517-549.
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Other versions of this item:
- Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 517-549, May.
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-31 (All new papers)
- NEP-DEV-2004-08-31 (Development)
- NEP-EFF-2004-10-21 (Efficiency & Productivity)
- NEP-INO-2004-08-31 (Innovation)
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