Long-Run Growth, Speed of Convergence and the Specification of Technology
-
Manuel A. Gómez
Abstract
This note analyzes the effect that the specification of technology has on the long-run growth rate and the asymptotic speed of convergence in the one-sector endogenous-growth model. We compare three otherwise identical economies – with the same baseline and parameter values – but with different production technologies: CES, VES or Sobelow, respectively. The long-run growth rate and the asymptotic convergence speed under CES production are lower than the corresponding ones under Sobelow production which, in turn, are lower than those under VES production. This is because a higher elasticity of substitution entails a higher easiness to substitute capital for labor which, in the end, results in a higher long-run growth rate.
Funding source: Ministerio de Economía, Industria y Competitividad, Gobierno de España
Award Identifier / Grant number: ECO2017-85701-P
Funding source: Spanish Agencia Estatal de Investigación (AEI)
Award Identifier / Grant number: ECO2017-85701-P
Funding source: Fondo Europeo de Desarrollo Regional (FEDER)
Award Identifier / Grant number: ECO2017-85701-P
Acknowledgments
This work has been supported by the Spanish Ministerio de Economía, Industria y Competitividad, the Spanish Agencia Estatal de Investigación (AEI) and the Fondo Europeo de Desarrollo Regional (FEDER) under Grant No. ECO2017-85701-P.
References
Arrow, K. J., H. B. Chenery, B. S. Minhas, and R. M. Solow. 1961. “Capital-Labor Substitution and Economic Efficiency.” Review of Economics and Statistics 43 (3): 225–50, https://doi.org/10.2307/1927286.Suche in Google Scholar
Cantore, C., F. Ferroni, and M. A. León-Ledesma. 2017. “The Dynamics of Hours Worked and Technology.” Journal of Economic Dynamics and Control 82: 67–82, https://doi.org/10.1016/j.jedc.2017.05.009.Suche in Google Scholar
Christensen, L. R., D. W. Jorgenson, and L. J. Lau. 1973. “Transcendental Logarithmic Production Frontiers.” Review of Economics and Statistics 55 (1): 28–45, https://doi.org/10.2307/1927992.Suche in Google Scholar
Diewert, W. E. 1971. “An application of the Shephard Duality Theorem: A Generalized Leontief Production Function.” Journal of Political Economy 79 (3): 481–507, https://doi.org/10.1086/259764.Suche in Google Scholar
Duffy, J., and C. Papageorgiou. 2000. “A Cross-Country Empirical Investigation of the Aggregate Production Function Specification.” Journal of Economic Growth 5 (1): 87–120, https://doi.org/10.1023/a:1009830421147.10.1023/A:1009830421147Suche in Google Scholar
Feng, G., and A. Serletis. 2008. “Productivity Trends in U.S. Manufacturing: Evidence from the NQ and AIM Cost Functions.” Journal of Econometrics 142 (1): 281–311, https://doi.org/10.1016/j.jeconom.2007.06.002.Suche in Google Scholar
Gómez, M. A. 2020. “Factor Substitution, Long-Run Growth, and Speed of Convergence in the One-Sector Convex Endogenous-Growth Model.” Metroeconomica 71 (1): 2–21, https://doi.org/10.1111/meca.12263.Suche in Google Scholar
Hardy, G., J. E. Littlewood, and G. Pólya. 1934. Inequalities. Cambridge, UK: Cambridge University Press.Suche in Google Scholar
Jones, L. E., and R. Manuelli. 1990. “A Convex Model of Equilibrium Growth: Theory and Policy Implications.” Journal of Political Economy 98 (5): 1008–38, https://doi.org/10.1086/261717.Suche in Google Scholar
Karabarbounis, L., and B. Neiman. 2014. “The Global Decline of the Labor Share.” Quarterly Journal of Economics 129 (1): 61–103, https://doi.org/10.1093/qje/qjt032.Suche in Google Scholar
Karagiannis, G., T. Palivos, and C. Papageorgiou. 2005. “Variable Elasticity of Substitution and Economic Growth: Theory and Evidence.” In New Trends in Macroeconomics, edited by C. Diebolt and C. Kyrtsou, 21–37. Berlin, Heidelberg: Springer Berlin Heidelberg.10.1007/3-540-28556-3_2Suche in Google Scholar
Klump, R., and O. de La Grandville. 2000. “Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions.” American Economic Review 90 (1): 282–91, https://doi.org/10.1257/aer.90.1.282.Suche in Google Scholar
Klump, R., P. McAdam, and A. Willman. 2012. “The Normalized CES Production Function: Theory and Empirics.” Journal of Economic Surveys 26 (5): 769–99, https://doi.org/10.1111/j.1467-6419.2012.00730.x.Suche in Google Scholar
Palivos, T., and G. Karagiannis. 2010. “The Elasticity of Substitution as an Engine of Growth.” Macroeconomic Dynamics 14 (5): 617–28, https://doi.org/10.1017/s1365100509000479.Suche in Google Scholar
Piketty, T., and E. Saez. 2014. “Inequality in the Long Run.” Science 344 (6186): 838–43, https://doi.org/10.1126/science.1251936.Suche in Google Scholar
Piketty, T., and G. Zucman. 2014. “Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010.” Quarterly Journal of Economics 129 (3): 1255–1310, https://doi.org/10.1093/qje/qju018.Suche in Google Scholar
Revankar, N. S. 1971. “A Class of Variable Elasticity of Substitution Production Functions.” Econometrica 39 (1): 61–71, https://doi.org/10.2307/1909140.Suche in Google Scholar
Reynès, F. 2019. “The Cobb-Douglas Function as a Flexible Function: A New Perspective on Homogeneous Functions through the Lens of Output Elasticities.” Mathematical Social Sciences 97: 11–17, https://doi.org/10.1016/j.mathsocsci.2018.10.002.Suche in Google Scholar
Sala-i Martin, X. 1990. Lecture Notes on Economic Growth(I): Introduction to the Literature and Neoclassical Models. Working Paper 3563. Cambridge, MA: National Bureau of Economic Research.10.3386/w3563Suche in Google Scholar
Sato, K. 1967. “A Two-Level Constant-Elasticity-of-Substitution Production Function.” Review of Economic Studies 34 (2): 201–218, https://doi.org/10.2307/2296809.Suche in Google Scholar
© 2022 Walter de Gruyter GmbH, Berlin/Boston
Artikel in diesem Heft
- Frontmatter
- Research Articles
- On the Microfoundation of Linear Oligopoly Demand
- Uncertain Outcomes and Climate Change Policy Using an Expo-Power Utility Function
- Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort
- Search Costs and Wage Inequality
- Product Differentiation in a Vertical Structure
- Corporate Profit Tax and Strategic Corporate Social Responsibility Under Foreign Acquisition
- Examining the Impact of Electoral Competition and Endogenous Lobby Formation on Equilibrium Policy Platforms
- Entry Deterrence and Free Riding in License Auctions: Incumbent Heterogeneity and Monotonicity
- When is Knowledge Acquisition Socially Beneficial in the Laffont–Tirole Regulatory Framework?
- Notes
- Long-Run Growth, Speed of Convergence and the Specification of Technology
- Working Time under Alternative Pay Contracts in the Ride-Sharing Industry
- Tacit Collusion with Consumer Preference Costs
- Competitively-Issued Convertible Bank Notes in a Theory of Finance: Earl Thompson Meets Fischer Black
Artikel in diesem Heft
- Frontmatter
- Research Articles
- On the Microfoundation of Linear Oligopoly Demand
- Uncertain Outcomes and Climate Change Policy Using an Expo-Power Utility Function
- Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort
- Search Costs and Wage Inequality
- Product Differentiation in a Vertical Structure
- Corporate Profit Tax and Strategic Corporate Social Responsibility Under Foreign Acquisition
- Examining the Impact of Electoral Competition and Endogenous Lobby Formation on Equilibrium Policy Platforms
- Entry Deterrence and Free Riding in License Auctions: Incumbent Heterogeneity and Monotonicity
- When is Knowledge Acquisition Socially Beneficial in the Laffont–Tirole Regulatory Framework?
- Notes
- Long-Run Growth, Speed of Convergence and the Specification of Technology
- Working Time under Alternative Pay Contracts in the Ride-Sharing Industry
- Tacit Collusion with Consumer Preference Costs
- Competitively-Issued Convertible Bank Notes in a Theory of Finance: Earl Thompson Meets Fischer Black
