The Substitution Elasticity, Factor Shares, and the Low-Frequency Panel Model

• 成果类型: Article
• 署名作者: Chirinko, Robert S.; Mallick, Debdulal
• 署名单位: University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital; Deakin University
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20140302
• 发表日期: 2017
• 页码: 225-253
• 关键词: energy-capital complementarity; econometric interpretations; labor substitution; business cycles; UNITED-STATES; INVESTMENT; cointegration; TECHNOLOGY; ratios; GROWTH

摘要

The value of the elasticity of substitution between labor and capital (sigma) is a crucial assumption in understanding the secular decline in the labor share of income. This paper develops and implements a new strategy for estimating this crucial parameter by combining a low-pass filter with panel data to identify the low-frequency/long-run relations appropriate to production function estimation. Standard estimation methods, which do not filter out transitory variation, generate downwardly biased estimates of 40 percent to 70 percent relative to the benchmark value. Despite correcting for this bias, our preferred estimate of 0.40 is substantially below the Cobb-Douglas assumption of sigma = 1.