A New Class of Production Functions and an Argument Against Purely Labor-Augmenting Technical Change
AbstractThis paper follows Jones (2005) in his approach to deriving the global production function from microfoundations. His framework is generalized by allowing for dependence between the Pareto distributions of labor- and capital-augmenting developments. Using the Clayton copula family to capture this dependence, we derive a “Clayton-Pareto” class of production functions that nests both the Cobb-Douglas and the CES. Embedding the resultant production function in a neoclassical growth framework, we draw conclusions for the long-run direction of technical change. Jones’ result of Cobb-Douglas global production functions and purely labor-augmenting technical change hinges on the assumption of independence of marginal Pareto distributions. In our more general case, the shape of local production functions matters for the shape of the global production function, and technical change augments both factors in the long run. Furthermore, the elasticity of substitution between capital and labor may exceed unity and thus yield endogenous growth.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 7069.
Date of creation: 19 Jun 2006
Date of revision:
global production function; technology frontier; CES; Pareto distribution; Clayton copula;
Other versions of this item:
- Jakub Growiec, 2008. "A new class of production functions and an argument against purely labor-augmenting technical change," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(4), pages 483-502.
- GROWIEC, Jakub, 2006. "A new class of production functions and an argument against purely labor-augmenting technical change," CORE Discussion Papers 2006056, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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