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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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    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. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
    2. 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.
    3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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    5. 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.
    6. Miyagiwa, Kaz & Papageorgiou, Chris, 2007. "Endogenous aggregate elasticity of substitution," Journal of Economic Dynamics and Control, Elsevier, vol. 31(9), pages 2899-2919, September.
    7. Zeira, Joseph, 2005. "Machines as Engines of Growth," CEPR Discussion Papers 5429, C.E.P.R. Discussion Papers.
    8. 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.
    9. 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.
    10. Zeira, Joseph, 1995. "Workers, Machines and Economic Growth," CEPR Discussion Papers 1139, C.E.P.R. Discussion Papers.
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