Factor Substitution and Factor Augmenting Technical Progress in the US: A Normalized Supply-Side System Approach
Using a normalized CES function with factor-augmenting technical progress, we estimate a supply-side system of the US economy from 1953 to 1998. Avoiding potential estimation biases that have occurred in earlier studies and putting a high emphasis on the consistency of the data set, required by the estimated system, we obtain robust results not only for the aggregate elasticity of substitution but also for the parameters of labor and capital augmenting technical change. We find that the elasticity of substitution is significantly below unity and that the growth rates of technical progress show an asymmetrical pattern where the growth of labor-augmenting technical progress is exponential, while that of capital is hyperbolic or logarithmic.
|Date of creation:||Jun 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +45 6550 2233
Fax: +45 6550 1090
Web page: http://degit.sam.sdu.dk/
More information through EDIRC
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.:
- Alan J. Auerbach, 2003.
"Fiscal Policy, Past and Present,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 34(1), pages 75-138.
- Costas Azariadis, 1996.
"The Economics of Poverty Traps Part One: Complete Markets,"
9606, Centro de Investigacion Economica, ITAM.
- Azariadis, Costas, 1996. " The Economics of Poverty Traps: Part One: Complete Markets," Journal of Economic Growth, Springer, vol. 1(4), pages 449-96, December.
- Lewis, Philip E. T. & Kirby, Michael G., 1988. "A new approach to modelling the effects of incomes policies," Economics Letters, Elsevier, vol. 28(1), pages 81-85.
- W. Bolt & P.J.A. van Els, 2000.
"Output Gap and Inflation in the EU,"
DNB Staff Reports (discontinued)
44, Netherlands Central Bank.
- Bentollia, S. & Saint-Paul, G., 1999.
"Explaining Movements in the Labor Share,"
9905, Centro de Estudios Monetarios Y Financieros-.
- Bentolila, Samuel & Saint-Paul, Gilles, 1998. "Explaining Movements in the Labour Share," CEPR Discussion Papers 1958, C.E.P.R. Discussion Papers.
- Samuel Bentolila & Gilles Saint Paul, 1999. "Explaining movements in the labor share," Economics Working Papers 374, Department of Economics and Business, Universitat Pompeu Fabra.
- Diamond, Peter & McFadden, Daniel & Rodriguez, Miguel, 1978. "Measurement of the Elasticity of Factor Substitution and Bias of Technical Change," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 2, chapter 5 McMaster University Archive for the History of Economic Thought.
- Ripatti, Antti & Vilmunen, Jouko, 2001. "Declining labour share – Evidence of a change in underlying production technology?," Research Discussion Papers 10/2001, Bank of Finland.
- Rowthorn, Robert, 1999. "Unemployment, Wage Bargaining and Capital-Labour Substitution," Cambridge Journal of Economics, Oxford University Press, vol. 23(4), pages 413-25, July.
- Alan Krueger, 1999.
"Measuring Labor's Share,"
792, Princeton University, Department of Economics, Industrial Relations Section..
- Rainer Klump, 2001. "Trade, money and employment in intertemporal optimizing models of growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(4), pages 411-428.
- Easterly, William & Fischer, Stanley, 1995. "The Soviet Economic Decline," World Bank Economic Review, World Bank Group, vol. 9(3), pages 341-71, September.
- Chirinko, Robert S. & Fazzari, Steven M. & Meyer, Andrew P., 1999. "How responsive is business capital formation to its user cost?: An exploration with micro data," Journal of Public Economics, Elsevier, vol. 74(1), pages 53-80, October.
- Kaas, Leo & von Thadden, Leopold, 2001.
"Unemployment, Factor Substitution, and Capital Formation,"
Discussion Paper Series 1: Economic Studies
2001,01, Deutsche Bundesbank, Research Centre.
- Leo Kaas & Leopold von Thadden, 2003. "Unemployment, Factor Substitution and Capital Formation," German Economic Review, Verein für Socialpolitik, vol. 4, pages 475-495, November.
- Leo Kaas & Leopold von Thadden, 2001. "Unemployment, Factor Substitution, and Capital Formation," Vienna Economics Papers 0102, University of Vienna, Department of Economics.
- Daron Acemoglu, 2003.
"Labor- And Capital-Augmenting Technical Change,"
Journal of the European Economic Association,
MIT Press, vol. 1(1), pages 1-37, 03.
- 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.
- Robert S. Chirinko, 2002.
"Corporate Taxation, Capital Formation, and the Substitution Elasticity between Labor and Capital,"
CESifo Working Paper Series
707, CESifo Group Munich.
- Chirinko, Robert S., 2002. "Corporate Taxation, Capital Formation,and the Substitution Elasticity between Labor and Capital," National Tax Journal, National Tax Association, vol. 55(N. 2), pages 339-355, June.
- Robert Chirinko, 2002. "Corporate Taxation, Capital Formation, and the Substitution Elasticity between Labor and Capital," Emory Economics 0201, Department of Economics, Emory University (Atlanta).
- Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 57-84.
- Norbert Berthold & Rainer Fehn & Eric Thode, 2002. "Falling Labor Share and Rising Unemployment: Long-Run Consequences of Institutional Shocks?," German Economic Review, Verein für Socialpolitik, vol. 3(4), pages 431-459, November.
- Douglas Gollin, 2001.
"Getting Income Shares Right,"
Department of Economics Working Papers
2001-11, Department of Economics, Williams College.
- Willman, Alpo, 2002. "Euro area production function and potential output: a supply side system approach," Working Paper Series 0153, European Central Bank.
- Caballero, Ricardo J. & Hammour, Mohamad L., 1998.
"Jobless growth: appropriability, factor substitution, and unemployment,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 48(1), pages 51-94, June.
- Ricardo J. Caballero & Mohamad L. Hammour, 1997. "Jobless Growth: Appropriability, Factor Substitution, and Unemployment," NBER Working Papers 6221, National Bureau of Economic Research, Inc.
- Caballero, R.J. & Hammour, M.L., 1997. "Jobless Growth: Appropriability, Factor-Substitution, and Unemployment," Working papers 97-18, Massachusetts Institute of Technology (MIT), Department of Economics.
- Alan J. Auerbach, 1983. "Corporate Taxation in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(2), pages 451-514.
- McAdam, Peter & Willman, Alpo, 2004. "Production, supply and factor shares: an application to estimating German long-run supply," Economic Modelling, Elsevier, vol. 21(2), pages 191-215, March.
- E. Yndgaard & Palle S. Andersen & Marc Klau, 1999. "Higher profits and lower capital prices: is factor allocation optimal?," BIS Working Papers 65, Bank for International Settlements.
- Charles I. Jones, 2003. "Growth, capital shares, and a new perspective on production functions," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
- Robert J. Barro & Paul Romer, 1993.
National Bureau of Economic Research, Inc, number barr93-1, December.
- Daron Acemoglu, 2001.
"Directed Technical Change,"
NBER Working Papers
8287, National Bureau of Economic Research, Inc.
- Berndt, Ernst R, 1976. "Reconciling Alternative Estimates of the Elasticity of Substitution," The Review of Economics and Statistics, MIT Press, vol. 58(1), pages 59-68, February.
- Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531, 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.
When requesting a correction, please mention this item's handle: RePEc:deg:conpap:c009_030. 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: (Jan Pedersen)
If references are entirely missing, you can add them using this form.