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The Shape of Production Function and the Direction of Technical Change

  • Charles I. Jones

This paper views the standard production function in macroeconomics as a reduced form and derives its properties from microfoundations. The shape of this production function is governed by the distribution of ideas. If that distribution is Pareto, then two results obtain: the global production function is Cobb-Douglas, and technical change in the long run is labor-augmenting. Kortum (1997) showed that Pareto distributions are necessary if search-based idea models are to exhibit steady-state growth. Here we show that this same assumption delivers the additional results about the shape of the production function and the direction of technical change.

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File URL: http://www.nber.org/papers/w10457.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10457.

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Date of creation: May 2004
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Publication status: published as Jones, Charles I. "The Shape Of Production Functions And The Direction Of Technical Change," Quarterly Journal of Economics, 2005, v120(2,May), 517-549.
Handle: RePEc:nbr:nberwo:10457
Note: EFG PR
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  1. Whelan, Karl, 2003. " A Two-Sector Approach to Modeling U.S. NIPA Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 627-56, August.
  2. Esteban Rossi-Hansberg & Mark L. J. Wright, 2006. "Urban structure and growth," Staff Report 381, Federal Reserve Bank of Minneapolis.
  3. Grabowski, Henry, 2002. "Patents and New Product Development in the Pharmaceutical and Biotechnology Industries," Working Papers 02-25, Duke University, Department of Economics.
  4. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  5. Simon Gilchrist & John C. Williams, 1998. "Putty-Clay and Investment: A Business Cycle Analysis," NBER Working Papers 6812, National Bureau of Economic Research, Inc.
  6. Harrison, Ann, 2005. "Has Globalization Eroded Labor’s Share? Some Cross-Country Evidence," MPRA Paper 39649, University Library of Munich, Germany.
  7. Emmanuel M. Drandakis & Edmond S. Phelps, 1965. "A Model of Induced Invention, Growth and Distribution," Cowles Foundation Discussion Papers 186, Cowles Foundation for Research in Economics, Yale University.
  8. Scherer, Frederic M. & Harhoff, Dietmar & Vopel, Katrin, 1997. "Exploring the Tail of Patented Invention Value Distributions," ZEW Discussion Papers 97-30, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Ricardo Lagos, 2006. "A Model of TFP," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 983-1007.
  10. Juan Carlos Cordoba, 2003. "On the Distribution of City Sizes," Urban/Regional 0302002, EconWPA.
  11. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
  12. Chung, Kee H & Cox, Raymond A K, 1994. "A Stochastic Model of Superstardom: An Application of the Yule Distribution," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 771-75, November.
  13. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  14. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  15. Samuel S. Kortum, 1997. "Research, Patenting, and Technological Change," Econometrica, Econometric Society, vol. 65(6), pages 1389-1420, November.
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