Openness To Trade as a Determinant of the Elasticity of Substitution between Capital and Labor
Some recent work on economic growth considers the aggregate elasticity of substitution between capital and labor as a measure of economic flexibility. It is thought to depend on technological and institutional determinants. I study how a openness to trade affects the aggregate elasticity of substitution of a large country in a Heckscher-Ohlin model with trade in intermediates and equalization of factor prices. With constant capital stocks, trade enlarges the set of available intermediates in the same way as a rise in the elasticity of substitution in their production would. An optimal tariff corresponds to an additional rise in the elasticity of substitution. In two growing economies, trade only rises the elasticity of substitution of the GDP function of the faster growing country.
|Date of creation:||Jun 2005|
|Date of revision:|
|Contact details of provider:|| Postal: Niels Bohrs Vej 9, 6700 Esbjerg|
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.:
- Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 57-84.
- Klump, Rainer & McAdam, Peter & Willman, Alpo, 2004.
"Factor substitution and factor augmenting technical progress in the US: a normalized supply-side system approach,"
Working Paper Series
0367, European Central Bank.
- Rainer Klump & Peter McAdam & Alpo Willman, 2004. "Factor Substitution and Factor Augmenting Technical Progress in the US: A Normalized Supply-Side System Approach," DEGIT Conference Papers c009_030, DEGIT, Dynamics, Economic Growth, and International Trade.
- James E. Anderson & Eric van Wincoop, 2004.
Boston College Working Papers in Economics
593, Boston College Department of Economics.
- Marianne Saam, 2004. "Distributional Effects of Growth and the Elasticity of Substitution," DEGIT Conference Papers c009_031, DEGIT, Dynamics, Economic Growth, and International Trade.
- Klump, Rainer & Preissler, Harald, 2000. " CES Production Functions and Economic Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 41-56, March.
- Antras, Pol, 2004.
"Is the U.S. Aggregate Production Function Cobb-Douglas? New Estimates of the Elasticity of Substitution,"
3196325, Harvard University Department of Economics.
- Antràs Pol, 2004. "Is the U.S. Aggregate Production Function Cobb-Douglas? New Estimates of the Elasticity of Substitution," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-36, April.
- Roland Benabou, 2003.
"Inequality, Technology, and the Social Contract,"
141, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics.
- Roland Benabou, 2004. "Inequality, Technology, and the Social Contract," NBER Working Papers 10371, National Bureau of Economic Research, Inc.
- Bénabou, Roland, 2004. "Inequality, Technology and the Social Contract," CEPR Discussion Papers 4741, C.E.P.R. Discussion Papers.
- Benabou, Roland, 2004. "Inequality, Technology, and the Social Contract," Papers 08-15-2005b, Princeton University, Research Program in Political Economy.
- James E. Rauch & Vitor Trindade, 2003. "Information, International Substitutability, and Globalization," American Economic Review, American Economic Association, vol. 93(3), pages 775-791, June.
- Slaughter, Matthew J., 2001. "International trade and labor-demand elasticities," Journal of International Economics, Elsevier, vol. 54(1), pages 27-56, June.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:deg:conpap:c010_013. 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.