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A Non‐parametric Examination of Capital–Skill Complementarity

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  • Daniel J. Henderson

Abstract

This paper uses non‐parametric kernel methods to construct observation‐specific elasticities of substitution for a balanced panel of 73 developed and developing countries to examine the capital–skill complementarity hypothesis. The exercise shows some support for capital–skill complementarity, but the strength of the evidence depends upon the definition of skilled labour and the elasticity of substitution measure being used. The added flexibility of the non‐parametric procedure is also capable of uncover ing that the elasticities of substitution vary across countries, groups of countries and time periods.

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  • Daniel J. Henderson, 2009. "A Non‐parametric Examination of Capital–Skill Complementarity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(4), pages 519-538, August.
    • Handle: RePEc:bla:obuest:v:71:y:2009:i:4:p:519-538
    DOI: 10.1111/j.1468-0084.2009.00550.x
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    Cited by:

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    2. Battisti, Michele & Gatto, Massimo Del & Parmeter, Christopher F., 2022. "Skill-biased technical change and labor market inefficiency," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    3. Xue, Jianpo & Yip, Chong K., 2013. "Aggregate elasticity of substitution and economic growth: A synthesis," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 60-75.
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    5. Wang, Le, 2013. "Estimating returns to education when the IV sample is selective," Labour Economics, Elsevier, vol. 21(C), pages 74-85.
    6. Chris Papageorgiou & Marianne Saam, 2008. "Two‐level CES Production Technology in the Solow and Diamond Growth Models," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(1), pages 119-143, March.
    7. M. Battisti & M. Del Gatto & A. F. Gravina & C. F. Parmeter, 2021. "Robots versus labor skills: a complementarity/substitutability analysis," Working Paper CRENoS 202104, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    8. Battisti, Michele & Gravina, Antonio Francesco, 2021. "Do robots complement or substitute for older workers?," Economics Letters, Elsevier, vol. 208(C).
    9. Mallick, Debdulal, 2012. "The role of the elasticity of substitution in economic growth: A cross-country investigation," Labour Economics, Elsevier, vol. 19(5), pages 682-694.
    10. Kai Sun, 2015. "Constrained nonparametric estimation of input distance function," Journal of Productivity Analysis, Springer, vol. 43(1), pages 85-97, February.

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    More about this item

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D2 - Microeconomics - - Production and Organizations

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