Capital-labor substitution and economic efficiency
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Cites background from "Capital-labor substitution and econ..."
...Arrow et al. (1961) suggest that the elasticity of substitution be estimated from the relation between the value added per unit of labor and the wage rate (W)....
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...Many empirical economists estimate Elasticity of Substitution by using the so-called ‘‘constant elasticity of substitution’’ (CES) production function of Arrow et al. (1961). Generally speaking, however, the true value of the elasticity of substitution is controversial....
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Cites background from "Capital-labor substitution and econ..."
...This assumption implies that optimal distribution will mean: (1) maximization of wages and profits; (2) a unique distribution where the marginal rate of substitution between wages and profits will be zero....
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...determined from equations (1) (5), and assume that the roots...
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...Stronger sufficient conditions are given in theorem 5, which guarantee that if a balanced growth path exists, it is both unique and stable, hence: Theorem 5: If any of the following conditions are satisfied for all wE(wmin, Wmax) then, (1) h'(k) = 0 is unique and stable, i....
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...However, constraining the technological change to the equilibrium conditions implies the following ?\e relationships : (1) A Harrod neutral technological change in the sector which produces Q2 will cause a release of labor which will imply that the equilibrium conditions could be restored only if the sector which produces Qi experiences a Solow neutral technological change....
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...Case 3b can be viewed as a strategy which in order to succeed must maintain the following conditions: (1) Capital could be released from sector 2 as such that ki will increase up to a point where ki = k2....
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