Evidence of Induced Innovation in US Sectoral Capital’s Shares
AbstractWe use annual data on capital’s share and relative factor prices from 35 US industries from 1960 to 2005 to test the induced innovation hypothesis. We derive, from a production function framework, testable implications for the effect of contemporaneous and lagged factor price ratios on capital’s share of production. The predicted effect is positive or negative depending on the elasticity of substitution between labor and capital. From panel regressions, the estimated effect of the contemporaneous factor price ratio implies an elasticity of substitution that is less than unity, consistent with the consensus from the literature. Based on this, our negative estimated effects for lagged price ratios are both statistically significant and consistent with the induced innovation hypothesis.
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Bibliographic InfoPaper provided by Department of Economics, West Virginia University in its series Working Papers with number 10-03.
Length: 27 pages
Date of creation: 2010
Date of revision:
induced innovation; biased technical change; capital’s share; labor’s share; elasticity of substitution;
Other versions of this item:
- Andrew T. Young & Hernando Zuleta & Andrés F. García-Suaza, 2010. "Evidence of induced innovation in US sectoral Capital’s shares," DOCUMENTOS DE TRABAJO 006740, UNIVERSIDAD DEL ROSARIO.
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-02 (All new papers)
- NEP-BEC-2010-05-02 (Business Economics)
- NEP-INO-2010-05-02 (Innovation)
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