The Normalized Ces Production Function: Theory and Empirics

Klump, Rainer; McAdam, Peter; Willman, Alpo

doi:10.1111/j.1467-6419.2012.00730.x

Cited by 180 publications

(164 citation statements)

References 97 publications

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“…Despite on-going critiques [102][103][104], the practical reality is that: (1) "economists have continued using the aggregate production function in both theoretical and applied works" ( [98], p. 262); and (2) that energy is increasingly used as a factor of production by a wide set of studies beyond academia, including government agencies [8,68,82,105] and central banks [67,[106][107][108][109]. Several reasons may explain this.…”

Section: Wider Literature Searchmentioning

confidence: 99%

“…Interestingly, empirical studies involving only capital and labour expend significant effort to quality adjust at least one variable [57,85,108,150], but those introducing energy as a third variable typically use unadjusted values for capital and labour [1,25,79,151]. This seems surprising, but perhaps reflects the significant effort required to develop or obtain time-series of quality-adjusted variables.…”

Section: Quality-adjusted Factorsmentioning

confidence: 99%

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Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation

et al. 2017

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Capital-labour-energy Constant Elasticity of Substitution (CES) production functions and their estimated parameters now form a key part of energy-economy models which inform energy and emissions policy. However, the collation and guidance as to the specification and estimation choices involved with such energy-extended CES functions is disparate. This risks poorly specified and estimated CES functions, with knock-on implications for downstream energy-economic models and climate policy. In response, as a first step, this paper assembles in one place the major considerations involved in the empirical estimation of these CES functions. Discussions of the choices and their implications lead to recommendations for CES empiricists. The extensive bibliography allows those interested to dig deeper into any aspect of the CES parameter estimation process.

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Section: Wider Literature Searchmentioning

confidence: 99%

Section: Quality-adjusted Factorsmentioning

confidence: 99%

Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation

et al. 2017

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“…The magnitude of the growth effect is comparable 32 As robustness checks we also estimated (26) using one year averages of the data. We also employed the approximation proposed by Kmenta (1967); see, Klump et al, 2012. In all cases we obtain estimates of the elasticity of substitution, well below unity.…”

Section:  mentioning

confidence: 99%

Productive government spending and its consequences for the growth–inequality tradeoff

Getachew

Turnovsky

2015

Research in Economics

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This paper investigates the effects of productive government spending on the relationship between growth and inequality in an economy subject to idiosyncratic production shocks and heterogeneous endowments. Assuming lognormal distributions, we derive tractable closed form solutions describing the equilibrium dynamics. We show how the effect of government investment on the equilibrium dynamics of both inequality and growth depends crucially upon the elasticity of substitution between public and private capital in production. This has important consequences for the growth-and welfaremaximizing rates of government investment. Finally, we supplement our theoretical analysis with numerical simulations, calibrated to approximate the productive characteristics of a real world economy. With the empirical evidence strongly supporting the complementarity between public and private capital, our simulations suggest that conclusions based on the commonly employed Cobb-Douglas production function may be seriously misleading.Key words: Government investment; Idiosyncratic shocks; Growth; Inequality JEL Classification: D31, O41 Revised versionJune 2015*The paper has benefited from comments received on earlier versions from seminar participants at the University of Durham and the University of Pretoria. We also thank Santanu Chatterjee for useful suggestions. Research for this paper was carried out while Getachew was visiting the University of Washington in the Fall of 2013. Turnovsky"s research was supported in part by the Van Voorhis endowment at the University of Washington.**Corresponding author: sturn@u.washington.edu 1 IntroductionThe role of public investment in infrastructure as a source of economic growth continues to be widely debated in both developing and advanced economies, with different economies adopting different policy options. Several emerging-market countries including India, China, and Brazil have undertaken extensive public investment, to which their high growth rates of recent years may at least in part be attributed. In contrast, several European countries have reduced public spending, as they have pursued austerity measures intended to deal with concerns related to their rising debt levels.Contemporaneously with these diverse policies toward public investment, we have witnessed increasing income inequality, both in emerging markets and in most OECD countries. This raises the important question that we address in this paper, namely the relationship between public investment directed toward growth enhancement and its consequences for income inequality.Interest in the relationship between public investment, output, and growth has a long history, dating back to Arrow and Kurz (1970), who examined it in the context of a neoclassical economy.Beginning with Barro (1990), an extensive literature has evolved addressing the issue in an endogenous growth framework, with a general consensus that government spending on infrastructure can yield significant productivity gains and thus enhance growth. See e.g. F...

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“…15 Klump, McAdam, and William (2012) comprises a discussion of the necessity of normalizing CES production functions when % 6 = 1. (When % = 1; the units can be factored out into a multiplicative constant.)…”

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confidence: 99%

Materials Prices and Productivity

Atalay

2012

SSRN Journal

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There is substantial within-industry variation in the prices that plants pay for their material inputs. Using plant-level data from the U.S. Census Bureau, I explore the consequences and sources of this variation in materials prices. For a sample of industries with relatively homogeneous products, the standard deviation of plant-level productivity would be 7% smaller if all plants faced the same materials prices. Moreover, plant-level materials prices are persistent, spatially correlated, and positively associated with the probability of exit. The contribution of entry and exit to aggregate productivity growth is smaller for productivity measures that are purged of materials price variation. After documenting these patterns, I discuss three potential sources of materials price variation: geography, di¤erences in suppliers'marginal costs, and within-supplier markup di¤erences. Together, these variables explain 15% of the variation of materials prices.

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The Normalized Ces Production Function: Theory and Empirics

Cited by 180 publications

References 97 publications

Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation

Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation

Productive government spending and its consequences for the growth–inequality tradeoff

Materials Prices and Productivity

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