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US Elasticities of Substitution and Factor-Augmentation at the Industry Level

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  • Andrew T. Young

    (Department of Economics, West Virginia University)

Abstract

We provide industry-level estimates of the elasticity of substitution (?) between capital and labor in the US economy. We also estimate rates of factor-augmentation. Aggregate estimates are produced using the same data. Our empirical model comes from the first-order conditions associated with a CES production function. Our data represents 35 industries at roughly the 2-digit SIC level from 1960 to 2005 and covers the entire US economy. We find that aggregate US ? is less than unity and perhaps less than 0.5.The same is likely true for the large majority of individual industries. We find no consistent and/or systematic evidence that aggregate ? is either greater or less than the value-added share-weighted average of industry ?s. Also, there is still considerable variation across the industry-level ? point estimates. Technical change in the aggregate appears to be net labor-augmenting. However, at the industry-level there is little evidence that the type of technical change is uniform across industries. For many individual industries, technical change may be characterized by net capital-augmentation.

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Bibliographic Info

Paper provided by Department of Economics, West Virginia University in its series Working Papers with number 10-06.

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Length: 48 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:wvu:wpaper:10-06

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Web page: http://www.be.wvu.edu/phd_economics/
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Keywords: elasticity of substitution; factor-augmenting technical change; labor-augmenting technical change; capital-augmenting technical change; corporate taxation; industry-level studies;

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Cited by:
  1. Ramón López & Sang Won Yoon, 2013. "Sustainable Economic Growth: Structural Transformation with Consumption Flexibility," Working Papers wp375, University of Chile, Department of Economics.

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