Capital stock-labor-energy substitution and production efficiency study for China

This study estimates the elasticities of substitution for China from 1953 to 2006 by the two-level constant elasticity of substitution (CES) production function with three factor inputs: capital stock, labor and energy. A technological change rate and non-constant returns to scale are under considered. All possible combinations and two other subdivided periods are carried out respectively and their technological change rates, elasticities of substitution and returns to scale are found. This study also provides an analysis of production efficiency by using marginal productivity of specific factor input according to the estimated results and distinguishes the marginal productivities deriving from the three different combinations. It suggests that the decision-makers of China need to consider the effects of different factor inputs on GDP growth.

►Elasticity of substitution for China by two-level CES production function. ►Technological change rate and non-constant returns to scale. ►Marginal productivity of energy has achieved to a certain level in China. ►The most efficient factor input for China in near future is labor force.