Article ID Journal Published Year Pages File Type
5096918 Journal of Econometrics 2010 15 Pages PDF
Abstract
The purpose of this paper is to present a new approach to econometric modeling of substitution and technical change. Substitution is determined by observable variables, such as prices of output and inputs and shares of inputs in the value of output. Our principal innovation is to represent the rate and biases of technical change by unobservable or latent variables. This representation is considerably more flexible than the constant time trends employed in the previous literature. An added advantage of the new representation is that the latent variables can be projected into the future, so that the rate and bias of technical change can be incorporated into econometric projections.
Related Topics
Physical Sciences and Engineering Mathematics Statistics and Probability
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