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 laboraugmenting technical progress is exponential, while that of capital is hyperbolic or logarithmic.

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Author:Rainer KlumpORCiDGND, Peter McAdam, Alpo Willman
Parent Title (German):Europäische Zentralbank: Working paper series ; No. 367
Series (Serial Number):European Central Bank: Working paper series (367)
Publisher:European Central Bank
Place of publication:Frankfurt am Main
Document Type:Working Paper
Date of Publication (online):2014/03/20
Year of first Publication:2004
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2014/03/20
Tag:Capital-labor substitution; United States; factor shares; normalized CES function; supply-side system; technological change
GND Keyword:Faktorsubstitution; Technischer Fortschritt; CES-Funktion; Substitutionselastizität; Geschichte 1953-1998
Page Number:61
© European Central Bank, 2004. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged. The views expressed in this paper do not necessarily reflect those of the European Central Bank.
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C2 Single Equation Models; Single Variables / C22 Time-Series Models; Dynamic Quantile Regressions (Updated!)
Licence (German):License LogoDeutsches Urheberrecht