Identifying the Elasticity of Substitution with Biased Technical Change

• 成果类型: Article
• 署名作者: Leon-Ledesma, Miguel A.; McAdam, Peter; Willman, Alpo
• 署名单位: University of Kent; European Central Bank
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.100.4.1330
• 发表日期: 2010
• 页码: 1330-1357
• 关键词: CES PRODUCTION-FUNCTIONS; Nonlinear estimation; ECONOMIC-GROWTH; long

摘要

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)