Evidence of induced innovation in US sectoral Capital´s shares
We use annual data on capital´s share and relative factor prices from 35 US industriesfrom 1960 to 2005 to test the induced innovation hypothesis. We derive, from a productionfunction framework, testable implications for the effect of contemporaneous and lagged factorprice ratios on capital´s share of production. The predicted effect is positive or negativedepending on the elasticity of substitution between labor and capital. From panel regressions, theestimated effect of the contemporaneous factor price ratio implies an elasticity of substitutionthat is less than unity, consistent with the consensus from the literature. Based on this, ournegative estimated effects for lagged price ratios are both statistically significant and consistentwith the induced innovation hypothesis.
|Date of creation:||06 Mar 2010|
|Date of revision:|
|Contact details of provider:|| |
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.:
- Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 1-54.
- Hernando Zuleta, 2007.
"An empirical note on factor shares,"
DOCUMENTOS DE TRABAJO
004363, UNIVERSIDAD DEL ROSARIO.
- Hernando Zuleta, 2008. "An empirical note on factor shares," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(3), pages 379-390.
- Robert S. Chirinko & Steven M. Fazzari & Andrew P. Meyer, 2002.
"That Elusive Elasticity: A Long-Panel Approach To Estimating The Price Sensitivity Of Business Capital,"
10th International Conference on Panel Data, Berlin, July 5-6, 2002
B3-1, International Conferences on Panel Data.
- Robert Chirinko & Steven M. Fazzari & Andrew P. Meyer, 2002. "That Elusive Elasticity: A Long-panel Approach to Estimating the Price Sensitivity of Business Capital," Emory Economics 0202, Department of Economics, Emory University (Atlanta).
- Acemoglu, Daron, 2002.
"Directed Technical Change,"
Review of Economic Studies,
Wiley Blackwell, vol. 69(4), pages 781-809, October.
- David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
- Bental, Benjamin & Demougin, Dominique, 2008.
"Do factor shares reflect technology?,"
Journal of Macroeconomics,
Elsevier, vol. 30(3), pages 1329-1334, September.
When requesting a correction, please mention this item's handle: RePEc:col:000092:006740. 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: (Paola Villalobos)
If references are entirely missing, you can add them using this form.