Capital/Labor substitution, capital deepening, and FDI

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract Empirical studies show that the elasticity of substitution between capital and labor is larger than one in developed countries but smaller in developing countries. This paper develops a production function which allows for this structure in the elasticity of substitution. The case of a falling real interest rate and capital deepening in the developed countries in the presence of FDI flows from the developed to the developing country is analyzed. It is shown that this structure in the elasticity of substitution can be responsible for a Ushaped relationship between the capital intensity of the developed country and the relative capital intensity of the developing country. This carries over to an inverted U-shaped relationship between the capital intensity of the developed country and FDI profitability. Terms of use: Documents in EconStor may

The effects of globalization and technology on the elasticity of substitution

“…Given the previous discussion, and to shed light into the above mentioned missing point after Saam's (2008) work, we extend Bentolila and Saint-Paul's (2003) framework by departing from the class of changing elasticity of substitution production function proposed by Antony (2009aAntony ( ,b, 2010, in which different factor intensities yield different values for the elasticity of substitution.…”

“…To conclude, given the void in the literature empirically connecting a changing elasticity of substitution to globalization and technology, and given the augmented SK curve obtained by extending Bentolila and Saint-Paul (2003) to meet Antony (2009aAntony ( ,b, 2010, we next move to the empirical analysis.…”

“…This paper, in contrast, takes an empirical perspective in search of potential determinants of σ. To undertake this analysis, we depart from a class of changing elasticity of substitution production functions developed by Antony (2009aAntony ( ,b, 2010, whose main feature is that variations in the relative factor intensity (the capital-labor ratio) may cause changes in σ.…”

“…In a nutshell, the direction of the change in σ associated to different relative factor intensities in Antony (2009aAntony ( ,b, 2010 is ambiguous. We do have Saam (2008), however, who specifies that openness to trade increases σ by enhancing capital deepening.…”

Consequences of Industry 4.0 in Business and Economics

“…However, the macro-and microeconomic points of view of Industry 4.0 remain a relatively little explored area. There exist studies focusing on innovation processes in companies, on the replacement of labor by capital, and the consequences in the increasing unemployment rates and globalization (Antony 2009;Saam 2008;Sala and Trivín 2018;Hedvicakova 2018). Overall companies, households and the public sector are facing a big challenge in the next generation with important economic consequences.…”