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On the elasticity of substitution between labor and ICT and IP capital and traditional capital

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  • Vahagn Jerbashian

    (University of Barcelona)

Abstract

I estimate a nested CES production function for a panel of European countries, distinguishing between information and communication technologies (ICT), intellectual property (IP) capital, and traditional capital. I allow for differences in the elasticities of substitution between labor, an aggregate of ICT and IP capital, and traditional capital. Results indicate that ICT and IP together are gross substitutes for labor, whereas traditional capital is a gross complement. Rapid technological progress and capital accumulation in ICT and IP capital largely explain the decline in labor income share. The imputed labor-aggregate capital elasticity of substitution is below 1 but increases over time. (Copyright: Elsevier)

Suggested Citation

  • Vahagn Jerbashian, 2026. "On the elasticity of substitution between labor and ICT and IP capital and traditional capital," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 60, April.
    • Handle: RePEc:red:issued:25-246
    DOI: 10.1016/j.red.2026.101332
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    Keywords

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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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