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Micro-foundation for a constant elasticity of substitution production function through mechanization

  • Nakamura, Hideki
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    We consider an increase in the range of capital use as a form of mechanization. A constant elasticity of substitution (CES) production function is dynamically derived from Leontief production functions through the endogenous complementary relationship between capital accumulation and mechanization. This implies that a CES production function can be resolved into technological change that does not involve changes in total factor productivity. Furthermore, using the normalizing procedure of the CES production function developed by de La Grandville [de La Grandville, O., 1989. In quest of the Slutsky diamond. American Economic Review 79, 468-481], we investigate how mechanization is related to the elasticity of substitution in our endogenous growth model.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0164-0704(08)00063-3
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    Article provided by Elsevier in its journal Journal of Macroeconomics.

    Volume (Year): 31 (2009)
    Issue (Month): 3 (September)
    Pages: 464-472

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    Handle: RePEc:eee:jmacro:v:31:y:2009:i:3:p:464-472
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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    1. Miyagiwa, Kaz & Papageorgiou, Chris, 2007. "Endogenous aggregate elasticity of substitution," Journal of Economic Dynamics and Control, Elsevier, vol. 31(9), pages 2899-2919, September.
    2. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
    3. Chris Papageorgiou & Kaz Miyagiwa, . "Elasticity of Substitution and Growth: Normalized CES in the Diamond Model," Departmental Working Papers 2001-05, Department of Economics, Louisiana State University.
    4. de La Grandville, Olivier, 1989. "Erratum [In Quest of the Slutsky Diamond]," American Economic Review, American Economic Association, vol. 79(5), pages 1307, December.
    5. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Olivier de La Grandville & Rainer Klump, 2000. "Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions," American Economic Review, American Economic Association, vol. 90(1), pages 282-291, March.
    7. Young, Alwyn, 1994. "Lessons from the East Asian NICS: A contrarian view," European Economic Review, Elsevier, vol. 38(3-4), pages 964-973, April.
    8. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    9. Zeira, Joseph, 1995. "Workers, Machines and Economic Growth," CEPR Discussion Papers 1139, C.E.P.R. Discussion Papers.
    10. Zeira, Joseph, 2005. "Machines as Engines of Growth," CEPR Discussion Papers 5429, C.E.P.R. Discussion Papers.
    11. de La Grandville, Olivier, 1989. "In Quest of the Slutsky Diamond," American Economic Review, American Economic Association, vol. 79(3), pages 468-81, June.
    12. Caselli, Francesco & Coleman II, Wilbur John, 2000. "The World Technology Frontier," CEPR Discussion Papers 2584, C.E.P.R. Discussion Papers.
    13. Duffy, John & Papageorgiou, Chris, 2000. "A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
    14. Klump, Rainer & Preissler, Harald, 2000. " CES Production Functions and Economic Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 41-56, March.
    15. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
    16. Winford H. Masanjala & Chris Papageorgiou, 2004. "The Solow model with CES technology: nonlinearities and parameter heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(2), pages 171-201.
    17. Subodh Kumar & R. Robert Russell, 2002. "Technological Change, Technological Catch-up, and Capital Deepening: Relative Contributions to Growth and Convergence," American Economic Review, American Economic Association, vol. 92(3), pages 527-548, June.
    18. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 517-549.
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