Education Briefing: The role of capital-labour substitution in economic growth
Purpose – Although the importance of the elasticity of substitution between capital and labour (s) has been recognized in many areas in economics, this parameter has not received enough attention in economic growth. The purpose of this paper is to review the recent development in the importance of s in economic growth. Design/methodology/approach – This paper specifically reviews the possibility of perpetual growth and slowdown, and the asymptotic behaviour of the balanced growth path for different values of s. It also reviews the determinants of the aggregate s. Findings – Based on the empirical evidence that the value of s significantly departs from the Cobb-Douglas value of unity, the paper recommends employing the constant elasticity of substitution (CES) production function in both theoretical and empirical growth research. Originality/value – This paper offers a new perspective on the elasticity of substitution between capital and labour due to its evaluation of various factors, methods and approaches.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 5 (2012)
Issue (Month): 1 (April)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://www.emeraldinsight.com/igdr.htm Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Theodore Palivos & Giannis Karagiannis, 2007.
"The elasticity of substitution as an engine of growth,"
Discussion Paper Series
2007_03, Department of Economics, University of Macedonia, revised Dec 2007.
- Palivos, Theodore & Karagiannis, Giannis, 2010. "The Elasticity Of Substitution As An Engine Of Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 14(05), pages 617-628, November.
- Irmen, Andreas, 2010.
"Steady-State Growth and the Elasticity of Substitution,"
0496, University of Heidelberg, Department of Economics.
- Irmen, Andreas, 2011. "Steady-state growth and the elasticity of substitution," Journal of Economic Dynamics and Control, Elsevier, vol. 35(8), pages 1215-1228, August.
- Andreas Irmen, 2010. "Steady-State Growth and the Elasticity of Substitution," CREA Discussion Paper Series 10-21, Center for Research in Economic Analysis, University of Luxembourg.
- Andreas Irmen, 2010. "Steady-State Growth and the Elasticity of Substitution," CESifo Working Paper Series 2955, CESifo Group Munich.
- Dennis R. Maki & Lindsay N. Meredith, 1987. "A Note on Unionization and the Elasticity of Substitution," Canadian Journal of Economics, Canadian Economics Association, vol. 20(4), pages 792-801, November.
- Claude Diebolt & Faustine Perrin, 2014. "Growth Theories," Working Papers 02-14, Association Française de Cliométrie (AFC).
- Mallick, Debdulal, 2010. "Capital-labor substitution and balanced growth," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1131-1142, December.
- Robert S. Chirinko, 2008. "ó: The Long And Short Of It," CESifo Working Paper Series 2234, CESifo Group Munich.
- Solow, Robert M., 2005. "Reflections on Growth Theory," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 0, pages 3-10 Elsevier.
- William Easterly & Stanley Fischer, 1994.
"The Soviet Economic Decline: Historical and Republican Data,"
NBER Working Papers
4735, National Bureau of Economic Research, Inc.
- Easterly, William & Fischer, Stanley & DEC, 1994. "The Soviet economic decline : historical and republican data," Policy Research Working Paper Series 1284, The World Bank.
- Xue, Jianpo & Yip, Chong K., 2012. "Factor Substitution And Economic Growth: A Unified Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 16(04), pages 625-656, September.
- Kaz Miyagiwa & Chris Papageorgiou, 2003.
"Elasticity of substitution and growth: normalized CES in the Diamond model,"
Springer, vol. 21(1), pages 155-165, 01.
- 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.
- Blackorby, Charles & Russell, R Robert, 1989. "Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities)," American Economic Review, American Economic Association, vol. 79(4), pages 882-88, September.
- Chirinko, Robert S., 2008. "[sigma]: The long and short of it," Journal of Macroeconomics, Elsevier, vol. 30(2), pages 671-686, June.
- Kaz Miyagiwa & Chris Papageorgiou, 2007.
"Endogenous Aggregate Elasticity of Substitution,"
0707, Department of Economics, Emory University (Atlanta).
- Saam, Marianne, 2008. "Openness to trade as a determinant of the macroeconomic elasticity of substitution," Journal of Macroeconomics, Elsevier, vol. 30(2), pages 691-702, June.
- 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.
- Klump, Rainer & Preissler, Harald, 2000. " CES Production Functions and Economic Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 41-56, March.
- Blitzer, Charles R, 1970. "Elasticity of Substitution and the Retardation of Soviet Growth Rates," The Review of Economics and Statistics, MIT Press, vol. 52(1), pages 104-08, February.
- 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.
When requesting a correction, please mention this item's handle: RePEc:eme:igdrpp:v:5:y:2012:i:1:p:89-101. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.