An estimation of US industry-level capital–labor substitution elasticities: support for Cobb–Douglas

Balistreri, Edward J.; McDaniel, Christine A.; Wong, Eina Vivian

doi:10.1016/s1062-9408(03)00024-x

Cited by 53 publications

(28 citation statements)

References 12 publications

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“…The quadratic term is generally significant, but the estimates of the elasticity of substitution between labour and capital are far too volatile to be credible. Given that this parameter is a highly non-linear function of the coefficients of the production function, this finding is not too surprising; it is also consistent with Balistreri et al (2003), who report for 28 US industries over the period 1947-1998 point estimates close to 1 but very wide confidence intervals. A possible explanation may be aggregation bias, with factor reallocation within industries causing the same (different) aggregate combinations of inputs producing different (the same) levels of aggregate output, and ultimately uncertainty in the estimation of the relationship between labour productivity and capital inputs.…”

Section: Labour Productivity Trends In Italy 1981-2004supporting

confidence: 87%

Trends of labour productivity in Italy: a study with panel co‐integration methods

Fachin

Gavosto²

2010

International Journal of Manpower

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Purpose -The main aim of this paper is to examine labour productivity trends in Italy over the period . Design/methodology/approach -To this end, relying on recent developments in the analysis of non-stationary dependent panels, the paper develops a new method for estimating total factor productivity (TFP) trends. Findings -The conclusions confirm the view that the recent decline in Italian labour productivity growth is mostly due to a widespread fall in TFP growth.Research limitations/implications -The main assumption underlying the proposed TFP estimation method is that technology growth is driven by a single trend common to all units included in the panel (industries, regions or countries). Originality/value -The paper provides two distinct contributions: empirically, it provides robust evidence that TFP slow-down is the main cause of recent negative trends in labour productivity in Italy. Methodologically, the paper proposes an approach to estimating TFP that enjoys several advantages: only basic data for input and output flows are needed, the non-stationary nature of the data is explicitly taken into account, and confidence intervals for TFP growth can be computed. This method can thus be easily applied to many routinely available datasets, to either corroborate existing growth accounting estimates or to obtain previously unavailable estimates.

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Section: Labour Productivity Trends In Italy 1981-2004supporting

confidence: 87%

Trends of labour productivity in Italy: a study with panel co‐integration methods

Fachin

Gavosto²

2010

International Journal of Manpower

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“…Without this assumption, some of the observed variation in the data (e.g., output) is associated with factor variation (and therefore σ) rather than technical change. It is likely that differences between our industry-level results reported later and those of Balisteri et al (2003) are due in part to our allowing different augmentation rates, whereas they do not. We make no claim that ours is the "correct" structure of the U.S. economy.…”

Section: The Empirical Model and Its Assumptionscontrasting

confidence: 55%

“…However, their data limit them to manufacturing industries only and their point estimates fall in the wide range from 0.01 to 2.00. Balisteri et al (2003), using data from 1947 to 1999, estimate σ's for 28 industries that span the entire U.S. economy. However, they fail to use a framework that allows for biased technical change.…”

Section: Introductionmentioning

confidence: 99%

U.S. Elasticities of Substitution and Factor Augmentation at the Industry Level

Young

2012

Macroecon. Dynam.

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We provide industry-level estimates of the elasticity of substitution (σ) between capital and labor in the United States. We also estimate rates of factor augmentation. Aggregate estimates are produced. Our empirical model comes from the first-order conditions associated with a constant-elasticity of substitution production function. Our data represent 35 industries at roughly the 2-digit SIC level, 1960SIC level, -2005. We find that aggregate U.S. σ is likely less than 0.620. σ is likely less than unity for a large majority of individual industries. Evidence also suggests that aggregate σ is less than the value-added share-weighted average of industry σ's. Aggregate technical change appears to be net labor-augmenting. This also appears to be true for the large majority of individual industries, but several industries may be characterized by net capital augmentation. When industry-level elasticity estimates are mapped to model sectors, the manufacturing sector σ is lower than that of services; the investment sector σ is lower than that of consumption.

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“…These elasticities are used to calibrate parameters of the utility function. In addition, elasticities of substitution in the production functions are taken from Balisteri, McDaniel, and Wong (2002) and Horan, Shortle, and Abler (2002), and Hertel, Stiegert, and Vroomen (1996). Values of these parameters are XX = YY = 0.5, BX = 1.25, MX = 0.585, and MY = 0.951.…”

Section: The Numerical Modelmentioning

confidence: 99%

Welfare Impacts of Alternative Public Policies for Agricultural Pollution Control in an Open Economy: A General Equilibrium Framework

Taheripour¹,

Khanna

Nelson

2008

American J Agri Economics

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A general equilibrium approach is used to evaluate the welfare impacts of alternative policies for reducing agricultural pollution in an open economy with preexisting distortions caused by income taxes and agricultural subsidies. The policies examined here include the removal of distortionary agricultural subsidies. We find that even though these distortions are small compared to others in the economy, removing them and imposing nitrogen reduction subsidies and/or output taxes can enhance welfare and reduce nitrogen pollution; thereby leading to a substantial double dividend. The relative efficiency of the alternative policies examined here depends on the level of the nitrogen reduction target. Copyright 2008, Oxford University Press.

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An estimation of US industry-level capital–labor substitution elasticities: support for Cobb–Douglas

Cited by 53 publications

References 12 publications

Trends of labour productivity in Italy: a study with panel co‐integration methods

Trends of labour productivity in Italy: a study with panel co‐integration methods

U.S. Elasticities of Substitution and Factor Augmentation at the Industry Level

Welfare Impacts of Alternative Public Policies for Agricultural Pollution Control in an Open Economy: A General Equilibrium Framework

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