CES Production Functions and Economic Growth

Klump, Rainer; Preissler, Harald

doi:10.1111/1467-9442.00183

Cited by 158 publications

(166 citation statements)

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“…The added flexibility of the CES production function allows us to investigate the role of the elasticity of substitution in growth. As Klump and Preissler (2000) show analytically, and Masanjala and Papageorgiou (2004), Duffy and Papageorgiou (2000) show empirically using an international data set, the elasticity of substitution can play in important role in the growth process.…”

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confidence: 93%

Determinants of Income Growth in Metropolitan and Nonmetropolitan Labor Markets

Hammond

Thompson

2008

American J Agri Economics

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This article analyzes determinants of growth across labor markets in the United States, using a production function approach based on four inputs: labor, manufacturing investment, human capital investment, and public capital investment. We find little role for public capital investment in growth, but that manufacturing investment spurred growth in nonmetropolitan areas, in contrast to metropolitan areas. We also find that human capital investment mattered more for metropolitan areas than for nonmetropolitan areas. Further, the presence of more colleges and universities, more household amenities, and lower tax rates are all found to have encouraged human capital accumulation in U.S. labor markets. Copyright 2008, Oxford University Press.

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confidence: 93%

Determinants of Income Growth in Metropolitan and Nonmetropolitan Labor Markets

Hammond

Thompson

2008

American J Agri Economics

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“…More recently, La Grandville (1989) gives proof of the positive relationship between the elasticity of substitution and the output level. On the discussion about the theoretical and empirical role of the CES in the dynamic macroeconomics, see also Klump and Preissler 2000, Klump and La Grandville 2000, and La Grandville 2009 Furthermore, the paper represents a contribution to the long tradition of continuous time disequilibrium models. Such an approach assumes non-market clearing and disequilibrium adjustment processes.…”

Section: Related Literaturementioning

confidence: 99%

Endogenizing the Ict Sector: A Multisector Approach

2017

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In this paper we present a non-linear model where ICT sector is endogenized. In the model there are two intermediate goods: a traditional good produced by capital and labor and the ICT good produced by innovative capital and skilled labor. The final good is obtained combining the two intermediate goods. The model is specified and estimated as continuous-time general disequilibrium framework. Our main results are the following. We find that the elasticity of substitution of the aggregate sector has a value intermediate between that of the ICT sector and that of the traditional sector, since the input complementarity is tighter in the former than in the latter. Moreover, in all the sectors elasticities are well below 1. As for the traditional sector, whose share is predominant in the production of the final good, the input complementarity helps explain most of the labour share decline of Italian economy as a consequence of the slowdown in the growth of capital intensity. In the ICT sector, technological progress, both in the form of capital augmenting and capital bias, showed a decline over the sample period with an obvious negative consequence on the global evolution of the technical progress. The results about the dynamics of the two intermediate sectors allows to interpret the "Italian paradox" of an industrial structure marked by an increasing weight of the traditional sector.JEL classification: E22; E23; O41; C51.

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“…From a theoretical point of view, fixing (X t , K t , E t , β E t ) is a means of normalizing the CES production function in the sense of Klump and de La Grandeville (2000) as well as Klump and Preissler (2000). In this paper, the normalization is effected by using the sample means of the random variables b(ρ; ·) and D(ρ; ·) conditional on ρ, i.e.…”

Section: Estimating the Ces Production Functionmentioning

confidence: 99%

“…Its specification consists, on the one hand, in estimating the elasticity of substitution between capital and energy with a time-series model of energy demand using cointegration methodology. On the other hand, the CES is normalized following the idea of Klump and de La Grandeville (2000) and Klump and Preissler (2000). Both elements of the specification exercise involve separate sources of model uncertainty, which is captured by presenting the central results as point estimates surrounded by confidence bands.…”

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confidence: 99%

Supply-side effects of strong energy price hikes in German industry and transportation

Knetsch

Molzahn

2011

Empir Econ

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The paper studies the short-term effects of energy price hikes on the supply of industrial goods and transport services including the repercussions on remuneration of input factors. While industry had suffered more strongly from the oil price shock of the late 1970s compared with the one of the early 1970s and the 2004-08 upsurge, evidence is reverse for transportation. Regarding the impact on the income distribution, both sectors share the pattern that in the recent episode rising energy costs were more than compensated by falling unit labor costs while in the 1970s cost structures had been strained by expansive wage policy in addition to the oil price shocks. Keywords: energy prices, supply of goods and services, income distribution.JEL classification: E23, E25, Q43. Non-echnical ummaryOil prices rose strongly in the period between 2004 and 2008. In this paper, we analyze how firms have reacted to this shock in the short run, as regards the supply of goods and services and/or output prices. The focus is on industry and transportation, as these sectors possess the highest shares in corporate energy consumption. In addition, the effects are compared with those of the two oil price shocks during the 1970s. (Since a partial-equilibrium analysis is adopted here, we do not need to distinguish whether oil price movements are driven by demand-side or supply-side factors.)In a first step, the short-run effect of an energy price hike on the supply of industrial goods and transport services is calculated on the basis of a theoretical model. In this setup, we assume that the output good is produced by three factors of production, namely capital, labor and energy. Firms react to energy price changes by adjusting the use of energy, labour input and, as a consequence, the volume of output. (In the short run, however, the capital stock is fixed and, for simplification, output prices are constant and money wages are settled.) The implications of the theoretical model are used to structure the empirical analysis. In particular, it is shown that the elasticity of substitution between capital and energy is central to the strength of the output response. Hence, the empirical analysis pays special attention to the estimation of this parameter.Contrary to the assumption imposed in theory, strong and lasting energy price surges cause firms to adjust output prices even in the short run. It is therefore more realistic to compute the output response on the basis of the increase in the effective energy price relative to the change in the output price. In order to obtain a comprehensive view of firms' reactions in such circumstances, the output price change is studied as well. In particular, it is decomposed into the contributions of the changes in the unit costs of factor inputs.The empirical analysis shows that industrial production was more severely affected by the oil price shock of the late 1970s than by those of the early 1970s and of the period between 2004 and 2008. By contrast, transport services were dampened more in th...

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CES Production Functions and Economic Growth

Cited by 158 publications

References 14 publications

Determinants of Income Growth in Metropolitan and Nonmetropolitan Labor Markets

Determinants of Income Growth in Metropolitan and Nonmetropolitan Labor Markets

Endogenizing the Ict Sector: A Multisector Approach

Supply-side effects of strong energy price hikes in German industry and transportation

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