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Output, Capital, and Labor in the Short, and Long-Run

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Author Info

  • Daniel Levy

    (Bar-Ilan University)

Abstract

Using a new series of capital stock and frequency domain analysis, this paper provides new empirical evidence on the relative importance of capital and labor in the determination of output in the short and long- run. Contrary to the common practice in the traditional growth accounting literature of assigning weights of 0.3 and 0.7 to capital and labor inputs respectively, the evidence presented here suggests that capital is a far more important factor than labor for determination of output at and near the zero frequency band. Furthermore, I show that the zero-frequency labor elasticity of output may well be close to zero, or even zero. Additional findings reported here support the traditional accelerator model of investment as a good description of the long-run investment process.

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File URL: http://128.118.178.162/eps/dev/papers/0505/0505012.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0505012.

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Length: 31 pages
Date of creation: 15 May 2005
Date of revision:
Handle: RePEc:wpa:wuwpdc:0505012

Note: Type of Document - pdf; pages: 31
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Web page: http://128.118.178.162

Related research

Keywords: Growth Accounting; Capital Investment; Output Fluctuation; Employment; Business Cycles and Aggregate Fluctuation; Frequency Domain Analysis; Spectrum and Cross-Spectrum; Coherence; Phase Shift; Gain; Zero-Frequency; Capital and Labor Elasticity of Output; Short-Run; Long- Run; Capital's and Labor's Share in Output; Accelerator Model of Investment;

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References

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  1. King, R.G. & Baxter, M., 1990. "Productive Externalities And Cyclical Volatility," RCER Working Papers 245, University of Rochester - Center for Economic Research (RCER).
  2. J. Bradford De Long & Lawrence H. Summers, 1990. "Equipment Investment and Economic Growth," NBER Working Papers 3515, National Bureau of Economic Research, Inc.
  3. John Hassler & Petter Lundvik & Torsten Persson & Paul Soderlind, 1992. "The Swedish business cycle: stylized facts over 130 years," Discussion Paper / Institute for Empirical Macroeconomics 63, Federal Reserve Bank of Minneapolis.
  4. Maddison, Angus, 1987. "Growth and Slowdown in Advanced Capitalist Economies: Techniques of Quantitative Assessment," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 649-98, June.
  5. Levy, Daniel, 1990. "Aggregate output, capital, and labor in the post-war U.S. economy," Economics Letters, Elsevier, vol. 33(1), pages 41-45, May.
  6. Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210 National Bureau of Economic Research, Inc.
  7. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18.
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Citations

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Cited by:
  1. Daniel Levy & Hashem Dezhbakhsh, 2002. "On the Typical Spectral Shape of an Economic Variable," Working Papers 2002-16, Department of Economics, Bar-Ilan University.
  2. Avichai Snir & Daniel Levy, 2007. "Human Capital and Economic Growth in the Potterian Economy," Emory Economics 0702, Department of Economics, Emory University (Atlanta).

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