Skip to main content

Identifying the Elasticity of Substitution with Biased Technical Change

Leon-Ledesma, Miguel A., McAdam, Peter, Willman, Alpo (2010) Identifying the Elasticity of Substitution with Biased Technical Change. American Economic Review, 100 (4). pp. 1330-1357. ISSN 0002-8282. (doi:10.1257/aer.100.4.1330) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1257/aer.100.4.1330

Abstract

The capital-labor substitution elasticity and technical biases in production are critical parameters. The received wisdom claims their joint identification is infeasible. We challenge that interpretation. Putting the new approach of "normalized" production functions at the heart of a Monte Carlo analysis we identify the conditions under which identification is feasible and robust. The key result is that jointly modeling the production function and first-order conditions is superior to single-equation approaches especially when merged with "normalization." Our results will have fundamental implications for production-function estimation under non-neutral technical change, for understanding the empirical relevance of normalization and variability underlying past empirical studies. (JEL E22, O33, O41)

Item Type: Article
DOI/Identification number: 10.1257/aer.100.4.1330
Additional information: number of additional authors: 2;
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: Stewart Brownrigg
Date Deposited: 07 Mar 2014 00:05 UTC
Last Modified: 01 Aug 2019 10:37 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/40542 (The current URI for this page, for reference purposes)
Leon-Ledesma, Miguel A.: https://orcid.org/0000-0002-3558-2990
  • Depositors only (login required):