Article ID Journal Published Year Pages File Type
966174 Journal of Macroeconomics 2008 16 Pages PDF
Abstract
Research on the elasticity of substitution between capital and labor - σ - has been proceeding for 75 years. While there is clearly a strong case for the importance of σ in the analysis of growth and other economic issues, much less agreement exists on the value of σ. This paper offers some perspectives on prior estimates of σ, emphasizing the fundamental tension between the short-run data that are available and the long-run parameter that is required. Estimates of σ based on various short-run and long-run models are discussed and, while the estimates range widely, the weight of the evidence suggests a value of σ in the range of 0.40-0.60. There is little evidence to sustain the assumption of a Cobb-Douglas production function.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
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