Isoelastic Elasticity of Substitution Production Functions
Streszczenie
We generalize the normalized Constant Elasticity of Substitution
(CES) production function by allowing the elasticity of substitution
to vary isoelastically with (i) relative factor shares, (ii) marginal rates of
substitution, (iii) capital–labor ratios, or (iv) capital–output ratios. Ensuing
four variants of Isoelastic Elasticity of Substitution (IEES) production
functions have a range of intuitively desirable properties and yield empirically
testable predictions for the functional relationship between relative
factor shares and (raw or technology-adjusted) capital–labor ratios. As
an empirical application, the parameters of IEES functions are estimated
in a three-equation supply-side system with factor-augmenting technical
change, based on data on aggregate production in the post-war US economy.
Our estimates consistently imply that the elasticity of substitution
between capital and labor has remained relatively stable, at about 0.8–0.9,
from 1948 to the 1980s, followed by a period of secular decline.
Kolekcje
- KAE Working Papers [101]
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