Technologic Parameters of Regional Economic System

Under deficit of labor supply, simple capital accumulation is limited as a driver of regional product growth, due to the law of falling marginal productivity of variable factors and absence of technological progress. A modified CES production function allows us to estimate key technological parameters of an economic system such as elasticity of substitution, returns to scale and labor intensity. These parameters were estimated for the specific economy of Khabarovsky krai. Data on capital are estimated using the «capital lifecycle» model. The constructed production function is used to estimate the rate of labor-saving technical progress necessary for achieving the higher levels of Khabarovsky krai’s GRP based on long-term GRP projections and accounting for labor supply limitations. Increasing Khabarovskyi krai’s GRP by a factor of 3.3 from 2010 to 2025 will require not only an increase of gross investment by 3.5 times in the same period, but also annual growth of unit productivity of capital of 1.4%. Otherwise, the mentioned capital increase accounts for only 1.8 times GRP growth. An alternative to technology-augmented capital productivity growth is an 1.6 times increase in the region’s employment compared to 2010. Thus, the model determines the influence of labor limitations on capital productivity and eventually on the GRP.