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Journal ArticleDOI

Capital-labor substitution and economic efficiency

TL;DR: In this article, the authors proposed a method to improve the quality of the service provided by the service provider by using the information of the user's interaction with the provider and the provider.
Abstract: Обсуждаются следующие темы: чистая теория производства, функциональное распределение дохода, технический прогресс, источники международных конкурентных преимуществ. Анализируются эластичность замещения между трудом и капиталом в обрабатывающей промышленности; производственные функции различного типа.
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Journal ArticleDOI
TL;DR: In this paper, the authors survey and assess the intrinsic links between production, factor substitution, and normalization, defined by the fixing of baseline values for relevant variables, and discuss the benefits normalization brings for empirical estimation and empirical growth research.
Abstract: The elasticity of substitution between capital and labor and, in turn, the direction of technical change are critical parameters in many fields of economics. Until recently, though, the application of production functions with specifically non-unitary substitution elasticities (i.e., non-Cobb–Douglas) was hampered by empirical and theoretical uncertainties. As recently revealed, ‘normalization’ of production-technology systems holds out the promise of resolving many of those uncertainties. We survey and assess the intrinsic links between production (as conceptualized in a production function), factor substitution (as made most explicit in Constant Elasticity of Substitution functions) and normalization (defined by the fixing of baseline values for relevant variables). First, we recall how the normalized Constant Elasticity of Substitution function came into existence and what normalization implies for its formal properties. Then we deal with the key role of normalization in recent advances in the theory of business cycles and of economic growth. Next, we discuss the benefits normalization brings for empirical estimation and empirical growth research. Finally, we identify promising areas of future research.

206 citations


Cites background from "Capital-labor substitution and econ..."

  • ...It is common knowledge that the first rigid derivation of the CES production function appeared in the famous Arrow et al. (1961) paper (hereafter ACMS).7 However, there were important forerunners, in particular the explicit mentioning of a CES-type production technology (with an elasticity of…...

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  • ...Solow and his coauthors publicly thanked Trevor for this insight (see Arrow et al, 1961)’....

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Journal ArticleDOI
TL;DR: In this article, the authors examine inconsistencies and controversies related to the use of CES production functions in growth models and show that not all variants of CES functions commonly used are consistently specified, and discuss possible explanations of variations in the elasticity of substitution.
Abstract: We examine inconsistencies and controversies related to the use of CES production functions in growth models. First, we show that not all variants of CES functions commonly used are consistently specified. Second, using a simple growth model, we find that a higher elasticity of substitution leads to a higher steady state and makes the emergence of permanent growth more probable. It is also pointed out that the effect of a higher elasticity of substitution on the speed of convergence depends on the relative scarcity of the factors of production. Finally, we discuss possible explanations of variations in the elasticity of substitution. JEL classification: O41; O11

204 citations


Cites background from "Capital-labor substitution and econ..."

  • ...Pitchford (1960): Y = (aKV' + bLUV)/I1 Arrow et al. (1961): Y = C[aKv + (1 - a)LP]IN David and van de Klundert (1965): Y = [(BK)'P + (AL)III Barrow and Sala-i-Martin (1995): Y = C{a(BK)' + (1 - a)[(1 -B)L]' where V := (a - 1)/a...

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  • ...Arrow et al. (1961) and Brown and de Cani (1963) took care of the latter child by developing a sound theoretical and econometric foundation for the CES function....

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Journal ArticleDOI
TL;DR: In this article, the authors define the elasticity of transformation analogously with substitution and derive the family of constant elasticity-of-transformation (CET) production possibility schedules, which are algebraically identical with CES isoquants, apart from a difference of sign determining their concavity.
Abstract: IN THIS PAPER we define the elasticity of transformation analogously with the elasticity of substitution. We derive the family of CET (constant elasticity of transformation) production possibility schedules which (not surprisingly) turn out to be algebraically identical with CES isoquants, apart from a difference of sign determining their concavity.2 We show that a given, constant, elasticity of transformation is compatible with product-neutral and product-biased shifts in the location of the frontier, pointing out that CET model therefore is of potential value in the analysis of technical change.3 Finally, we suggest a possible application of the CET model in the empirical analysis of supply, quoting by way of illustration the results of an empirical three-sector agricultural supply model fitted to post war Australian data.

195 citations

Journal ArticleDOI
TL;DR: In this paper, a general functional form is considered for which the linear and logarithmic functional forms are special cases for money stock defined as currency plus demand deposits, and the empirical evidence suggests that the log-factor functional model is appropriate for time deposits.
Abstract: A general functional form is considered for which the linear and logarithmic functional forms are special cases. The general functional form is a power transformation of each of the variables—each variable is raised to a λ power. This functional form is estimated for the demand for money using the maximum likelihood method. Real money demand is specified to be a function of real current income and a short-term interest rate. The empirical evidence suggests that the logarithmic functional form is appropriate for money stock defined as currency plus demand deposits. For money stock defined to also include time deposits, neither the linear nor logarithmic form seems appropriate. The estimates of λ are insensitive to expansion of the model explaining money demand, but functional form is important for discrimination among alternative hypotheses.

195 citations

Journal ArticleDOI
TL;DR: The economics of growth has shown that countries grow by better allocating whatever resources are at their disposal and by introducing productivity-enhancing innovations as discussed by the authors, and strategic entrepreneurship plays a key role in this process by searching for, combining, trying out, etc., new resource combinations in the pursuit of profits under uncertainty.
Abstract: The economics of growth has shown that countries grow by better allocating whatever resources are at their disposal and by introducing productivity-enhancing innovations. Strategic entrepreneurship plays a key role in this process by searching for, combining, trying out, etc., new resource combinations in the pursuit of profits under uncertainty. Institutions that support economic freedom allow such experimentation to take place at low transaction costs, positively influencing total factor productivity. We test these ideas on a unique panel data set derived from Compendia, World Bank data, and the Fraser Institute's economic freedom data. Copyright © 2013 Strategic Management Society.

194 citations

References
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Journal ArticleDOI
TL;DR: In this article, the authors proposed a method to improve the performance of the system by using the information of the user's interaction with the system and the system itself, including the interaction between the two parties.
Abstract: В статье производится анализ агрегированной производственной функции, вводится аппарат, позволяющий различать движение вдоль такой функции от ее сдвигов. На основании сделанных в статье предположений делаются выводы о характере технического прогресса и технологических изменений. Существенное внимание уделяется вариантам применения концепции агрегированной производственной функции.

10,850 citations

Journal ArticleDOI

3,961 citations

Book
01 Jan 1956
TL;DR: In this paper, a very brief treatment of three questions relating to the history of our economic growth since the Civil War is given, namely: (1) How large has been the net increase of aggregate output per capita, and to what extent has this increase been obtained as a result of greater labor or capital input on the one hand and of a rise in productivity on the other? (2) Is there evidence of retardation, or conceivably acceleration, in the growth of per capita output? (3) Have there been fluctuations in the rate of growth of output, apart
Abstract: Introduction This paper is a very brief treatment of three questions relating to the history of our economic growth since the Civil War: (1) How large has been the net increase of aggregate output per capita, and to what extent has this increase been obtained as a result of greater labor or capital input on the one hand and of a rise in productivity on the other? (2) Is there evidence of retardation, or conceivably acceleration, in the growth of per capita output? (3) Have there been fluctuations in the rate of growth of output, apart from the shortterm fluctuations of business cycles, and, if so, what is the significance of these swings? The answers to these three questions, to the extent that they can be given, represent, of course, only a tiny fraction of the historical experience relevant to the problems of growth. Even so, anyone acquainted with their complexity will realize that no one of them, much less all three, can be treated satisfactorily in a short space. I shall have to pronounce upon them somewhat arbitrarily. My ability to deal with them at all is a reflection of one of the more important, though one of the less obvious, of the many aspects of our growing wealth, namely, the accumulation of historical statistics in this country during the last generation. For the most part, the figures which I present or which underlie my qualitative statements are taken directly from tables of estimates of national product, labor force, productivity, and the like compiled by others.

1,031 citations

Book
01 Jan 1938

926 citations