Capital-Labor Substitution: A Note

Fuchs, Victor R.

doi:10.2307/1927932

Cited by 23 publications

(6 citation statements)

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“…The main ® nding, that the hypothesis of a unitary elasticity of substitution cannot be rejected at the 5% level of signi® cance, agrees with that of Cassimatis (1969) and many econometric studies conducted for other industries (Fuchs, 1963;Ferguson, 1965;Nerlove, 1967). It may, therefore, be concluded that construction ® rms in Singapore are responsive to relative changes in factor prices.…”

Section: Discussionsupporting

confidence: 83%

The elasticity of capital-labour substitution in Singapore construction

Tan¹

1996

Construction Management and Economics

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Section: Discussionsupporting

confidence: 83%

The elasticity of capital-labour substitution in Singapore construction

Tan¹

1996

Construction Management and Economics

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“…For example, depending on the methodology employed, the existing literature finds values that are both well below and near the unity. Early studies based on cross‐sectional analysis generally find an elasticity of substitution close to one; that is, they could not reject a CD production function (see, inter alia , Fuchs , Zarembka , Dhrymes and Zarembka ). Differently, estimates based on time series typically find an elasticity of substitution significantly lower than one, implying gross complementarity between production factors; for example, Lucas () provides a value of σ in the range 0.3–0.5, Coen () finds that the best fit occurs when

σ = 0.2

, and Maddala () estimates values for σ between 0.1 and 0.2.…”

Section: Policy Analysismentioning

confidence: 99%

Aggregate Stability and Balanced-Budget Rules

Ghilardi¹,

Rossi²

2014

Journal of Money, Credit and Banking

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It has been shown that under perfect competition and a Cobb-Douglas production function, a basic real business cycle model may exhibit indeterminacy and sunspot fluctuations when income tax rates are determined by a balanced-budget rule (BBR). This paper introduces in an otherwise standard real business cycle model a more general and data-coherent class of production functions, namely, a constant elasticity of substitution production function. We show that the degree of substitutability between production factors is a key ingredient to understanding the (de)stabilizing properties of a BBR. Then we calibrate the model consistently with the empirical evidence; that is, we set the elasticity of substitution between labor and capital below unity. We show that compared to the Cobb-Douglas case, the likelihood of indeterminacy under a BBR is greatly reduced in the U.S., the EU, and the UK.JEL codes: E32, E62

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“…This is probably because little evidence for FIRs among countries or regions was found in previous empirical studies in the 1960s (e.g. Ball, 1966; Fuchs, 1963; Leontief, 1964; Moroney, 1967). 2 This supported Samuelson’s (1951) view that FIRs are of theoretical interest rather than empirical importance.…”

Section: Introductionmentioning

confidence: 89%