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Aggregate output, capital, and labor in the post-war U.S. economy

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  • Daniel Levy

    (Bar-Ilan University [Israël], Emory University [Atlanta, GA], RCEA - Rimini Center for Economic Analysis)

Abstract

New estimates of an aggregate long-term production function for the postwar U.S. economy are reported. The results indicate that this long-term aggregate production function exhibits a slight but statistically significant increasing returns to scale. Since virtually all econometric growth studies assume constant returns to scale, my finding raises serious doubts about the validity of this common practice. I also find that since the war real output has become more sensitive to changes in capital and less sensitive to changes in labor. In particular, I show that the long-run capital and labor elasticities of real output are both in the range of 0.44-0.55. Similar estimates for the capital and labor elasticities of output from earlier studies covering prewar and the inter-war periods are 0.25 and 0.75, respectively.

Suggested Citation

  • Daniel Levy, 1990. "Aggregate output, capital, and labor in the post-war U.S. economy," Post-Print hal-02382439, HAL.
    • Handle: RePEc:hal:journl:hal-02382439
    DOI: 10.1016/0165-1765(90)90198-A
    Note: View the original document on HAL open archive server: https://hal.science/hal-02382439
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    References listed on IDEAS

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    1. Jorgenson, Dale W, 1988. "Productivity and Postwar U.S. Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 23-41, Fall.
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    5. Abel, Andrew B., 1990. "Consumption and investment," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 14, pages 725-778, Elsevier.
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    Cited by:

    1. Levy, Daniel, 1994. "Output, Capital, and Labor in the Short, and Long-Run," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 60(4), pages 946-960.
    2. George C. Bitros, 2018. "Monetary Policy, Market Structure and the Income Shares in the U.S," Open Economies Review, Springer, vol. 29(2), pages 383-413, April.
    3. Knoblach, Michael & Rößler, Martin & Zwerschke, Patrick, 2016. "The Elasticity of Factor Substitution Between Capital and Labor in the U.S. Economy: A Meta-Regression Analysis," CEPIE Working Papers 03/16, Technische Universität Dresden, Center of Public and International Economics (CEPIE).

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    More about this item

    Keywords

    Aggregate Production Function; Cobb-Douglas Production Function; Returns to Scale; Long-Term; Increasing Returns to Scale;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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