A new class of production functions and an argument against purely labor-augmenting technical change
This paper follows Jones (2005) in his approach to deriving the global production function from microfoundations. His framework is generalized by allowing for dependence between the Pareto distributions of labor- and capital-augmenting developments. Using the Clayton copula family to capture this dependence, we derive a 'Clayton-Pareto' class of production functions that nests both the Cobb-Douglas and the CES. Embedding the resultant production function in a neoclassical growth framework, we draw conclusions for the long-run direction of technical change. Jones' result of Cobb-Douglas global production functions and purely laboraugmenting technical change hinges on the assumption of independence of marginal Pareto distributions. In our more general case, the shape of local production functions matters for the shape of the global production function, and technical change augments both factors in the long run. Furthermore, the elasticity of substitution between capital and labor may exceed unity and thus yield endogenous growth.
|Date of creation:||00 Jun 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
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.:
- Revankar, Nagesh S, 1971. "A Class of Variable Elasticity of Substitution Production Functions," Econometrica, Econometric Society, vol. 39(1), pages 61-71, January.
- David N. Weil, 1996.
"Appropriate Technology and Growth,"
96-24, Brown University, Department of Economics.
- Xavier Gabaix, 1999. "Zipf's Law for Cities: An Explanation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 739-767.
- Ola Olsson, 2005. "Technological Opportunity and Growth," Journal of Economic Growth, Springer, vol. 10(1), pages 31-53, 01.
- Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 517-549.
- H. Uzawa, 1961. "Neutral Inventions and the Stability of Growth Equilibrium," Review of Economic Studies, Oxford University Press, vol. 28(2), pages 117-124.
- Yuhn, Ky-hyang, 1991. "Economic Growth, Technical Change Biases, and the Elasticity of Substitution: A Test of the De La Grandville Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 340-46, May.
- R. M. Solow & J. Tobin & C. C. von Weizsäcker & M. Yaari, 1966. "Neoclassical Growth with Fixed Factor Proportions," Review of Economic Studies, Oxford University Press, vol. 33(2), pages 79-115.
- Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
- Francesco Caselli & Wilbur John Coleman II, 2006.
"The World Technology Frontier,"
American Economic Review,
American Economic Association, vol. 96(3), pages 499-522, June.
- de La Grandville, Olivier, 1989. "In Quest of the Slutsky Diamond," American Economic Review, American Economic Association, vol. 79(3), pages 468-81, June.
- Daron Acemoglu, 2000.
"Labor- and Capital- Augmenting Technical Change,"
NBER Working Papers
7544, National Bureau of Economic Research, Inc.
- Atkinson, Anthony B & Stiglitz, Joseph E, 1969. "A New View of Technological Change," Economic Journal, Royal Economic Society, vol. 79(315), pages 573-78, September.
- H. S. Houthakker, 1955. "The Pareto Distribution and the Cobb-Douglas Production Function in Activity Analysis," Review of Economic Studies, Oxford University Press, vol. 23(1), pages 27-31.
- 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.
- Sattinger, Michael, 1975. "Comparative Advantage and the Distributions of Earnings and Abilities," Econometrica, Econometric Society, vol. 43(3), pages 455-68, May.
When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2006056. 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: (Alain GILLIS)
If references are entirely missing, you can add them using this form.