Skip to main content
Kent Academic Repository

Appropriate Technology and Balanced Growth

Leon-Ledesma, Miguel A., Satchi, Mathan (2019) Appropriate Technology and Balanced Growth. The Review of Economic Studies, 86 (2). pp. 807-835. ISSN 0034-6527. (doi:10.1093/restud/rdy002) (KAR id:62892)

PDF Publisher pdf
Language: English

Download this file
[thumbnail of rdy002.pdf]
Request a format suitable for use with assistive technology e.g. a screenreader
PDF Pre-print
Language: English

Restricted to Repository staff only
Contact us about this Publication
[thumbnail of 1614.pdf]
PDF Author's Accepted Manuscript
Language: English

Restricted to Repository staff only
Contact us about this Publication
[thumbnail of MS17762manuscript.pdf]
Official URL:


We provide a general theoretical characterization of how firm's technology choice on a technology frontier determines the long-run elasticity of substitution between capital and labor. We show that the shape of the frontier determines factor shares and the elasticity of substitution between capital and labor. If there are adjustment costs to technology choice, the short- and long-run elasticities differ, with the long-run always higher. If the technology frontier is log-linear, the production function becomes Cobb-Douglas in the long run but, consistent with empirical evidence, short-run dynamics are characterized by gross complementarity. The approach is easily implementable and yields a powerful way to introduce CES-type production functions in macroeconomic models. We provide an illustration within an estimated dynamic general equilibrium model and show that the use of our production technology provides a good match for the short- and medium-run behavior of the US labor share.

Item Type: Article
DOI/Identification number: 10.1093/restud/rdy002
Uncontrolled keywords: Balanced growth, Appropriate technology, Elasticity of substitution
Subjects: H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Miguel Leon-Ledesma
Date Deposited: 21 Aug 2017 08:27 UTC
Last Modified: 04 Jul 2023 12:35 UTC
Resource URI: (The current URI for this page, for reference purposes)

University of Kent Author Information

  • Depositors only (login required):

Total unique views for this document in KAR since July 2020. For more details click on the image.