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Summary: China's labor share has declined since late 1990s. Using the methodology developed by Oberfield and Raval, this paper estimates China's aggregate capital‐labor elasticity of substitution, leveraging the estimated micro‐level elasticities. The findings indicate that China's aggregate capital‐labor elasticity falls within the range of 0.9 to 1. Utilizing this estimated aggregate elasticity for labor share decomposition, we find that the bias of technical change emerges as the predominant factor driving the decline in labor share. [ABSTRACT FROM AUTHOR]

This study investigates the relationship between information technology (IT) and human labor through the lens of education level, task routineness, and artificial intelligence (AI). It makes use of a comprehensive data set covering 60 U.S. industries from 1998 to 2013. The results show that a college degree may not be sufficient, especially in routine-intensive industries, where a graduate degree may be increasingly necessary to meet the demands of computerized work environments. They also suggest that continuous education and IT skill development are essential for workers to thrive in a technology-driven economy. Governments should continue to support higher education to meet the demands driven by IT implementation, particularly as advanced technologies like AI emerge. Long-term training programs should be established to equip less-educated workers with the necessary skills to navigate technological changes. Additionally, policy makers should be cautious about the potential impact of advanced IT, such as AI, on employment rates and consider the consequences of increasing minimum wage levels, as it may incentivize firms to invest more in automation. Overall, this study emphasizes the need for a comprehensive understanding of the IT-labor relationship, guiding decision making for individuals, firms, educators, and policy makers in adapting to the challenges and opportunities presented by advancing technology. Although information technology (IT) is increasingly replacing human labor, the IT-labor relationship is more nuanced than it appears. We examine the IT-labor relationship in terms of various levels of education, intensities of routine tasks, and exposure to artificial intelligence (AI). Making use of an industry-level data set covering 60 U.S. industries from 1998 to 2013, we adopt an innovative measure of elasticity of substitution that enables us to capture the asymmetric price impact between IT and labor. Our findings indicate that IT generally complements high-education labor (master's degree or above), while substituting for low-education labor (high school degree or below). For middle-education labor (bachelor's or associate's degree), however, the IT-labor relationship is more nuanced: They are complements in non-routine-intensive industries, but substitutes in routine-intensive industries. We also find that IT is a complement (substitute) with high-education labor in industries with lower (higher) AI exposure and remains a net substitute for low- and middle-education labor, regardless of their AI exposure. Our findings suggest that even college-educated labor has now become susceptible to IT displacement, whereas labor with graduate education largely remains a strong complement to IT (with an exception in high-AI-exposure industries). Theoretical and policy implications are discussed. History: Eric Zheng, Senior Editor. Funding: Tyson Browning is grateful for support from a Neeley School of Business Research Excellence Award. Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2021.0391. [ABSTRACT FROM AUTHOR]

This paper studies the effect of factor substitution on long‐run growth and the convergence speed in the one‐sector endogenous‐growth model. We consider a general production function that encompasses the most commonly used specifications as particular cases. For two economies with the same initial conditions and parameter values, including the baseline elasticity of substitution (EOS), the one with the higher asymptotic EOS has the higher long‐run growth and convergence speed. If the asymptotic EOS is a nondecreasing function of its baseline value, an increase in the baseline EOS entails a higher long‐run growth and convergence speed. [ABSTRACT FROM AUTHOR]

Based on a multisector general equilibrium framework, we show that the sectoral elasticity of substitution plays the key role in the evolution of asymmetric tails of macroeconomic fluctuations and the establishment of robustness against productivity shocks. A non-unitary elasticity of substitution renders a nonlinear Domar aggregation, where normal sectoral productivity shocks translate into non-normal aggregated shocks with variable expected output growth. We empirically estimate 100 sectoral elasticities of substitution, using the time-series linked input-output tables for Japan and find that the production economy is elastic overall, relative to a Cobb-Douglas economy with unitary elasticity. In addition to the previous assessment of an inelastic production economy for the USA, the contrasting tail asymmetry of the distribution of aggregated shocks between the USA and Japan is explained. Moreover, the robustness of an economy is assessed by expected output growth, the level of which is led by the sectoral elasticities of substitution under zero-mean productivity shocks. [ABSTRACT FROM AUTHOR]

The economics literature emphasizes the importance of the elasticity of substitution between capital and labour in several economic contexts. However, analyses of the effect of the elasticity of substitution on the direction of technological change are often overlooked. Most assessments of the direction of technological change rely on a Constant Elasticity of Substitution (CES) production framework. This strand of empirical work considers the elasticity of substitution between capital and labour as a deep and fixed parameter. In this article, we show that the change in the elasticity of substitution that has occurred in recent decades might be an alternative source of change of factor income shares in addition to changes in factor-augmenting technological change. We construct a theoretical environment in which the elasticity of substitution is determined endogenously by the capital share and capital intensity. Rolling window estimates and non-linear estimation methods show that the elasticity of substitution in nine OECD economies observed between 1950 and 2017 was not constant and that, in fact, in the latter half of the 1970s, the elasticity of substitution increased, in the presence of labour-augmenting technical change. [ABSTRACT FROM AUTHOR]

This paper addresses the substitution elasticity of capital on the labour force in the context of the development of intellectualization. Given the substitution of capital for labour, China's benchmark listed logistics companies are compared with an American company to discuss the evolution of capital – labour substitution. A large-scale intellectualization process began in 2017, and based on a variable elasticity of substitution, this paper creates an econometric model of substitution elasticity between capital and labour and its evolution between 2017 and 2021. The American logistics company UPS maintains a relatively high level of substitution elasticity, and Chinese logistics companies are quickly catching up. The substitution elasticity of capital on labour in Chinese enterprises trends upward year after year. In 2021, the capital – labour substitution elasticity of logistics enterprises in both countries showed considerable growth. The calculation model of substitution elasticity presented in this paper can be extended to different regions and industries to measure intelligent development levels and the relationship between capital and the labour force. [ABSTRACT FROM AUTHOR]

This paper provides a structural panel GMM (P-GMM) estimator of the elasticity of substitution between capital and labour that does not depend on external instruments, and which can be applied in the presence of biased technical change. We identify the conditions under which P-GMM is a consistent estimator and compare it to a fixed effects estimator. Using a Monte Carlo study, we find that the P-GMM estimator is nearly unbiased provided the number of time periods (T) is not too small. We show analytically how the small- T bias is related to metrics of weak identification. In an application on manufacturing firms in Norway, we estimate the elasticity of substitution to be 1.9 using the P-GMM and 1.0 using the fixed effects estimator. Neglecting simultaneity may thus lead to the conclusion that capital and labour are complements or can be described by Cobb–Douglas technology, when, in fact, they are substitutes. [ABSTRACT FROM AUTHOR]

Recent research has begun to imply intermediate goods–skill complementarity; however, this possible complementarity has been hypothesized but not statistically tested, despite the increasing importance of intermediate goods in production. This study provides statistical evidence regarding whether intermediate goods are more complementary with skilled labor than with unskilled labor. Using panel data from 40 countries over the period 1995–2009, we estimate a two-level constant elasticity of substitution (CES) production function. Our major findings are fivefold. First, at the aggregated one-sector level, the elasticity of substitution between intermediate goods and unskilled labor is 1.22, which is significantly greater than that between intermediate goods and skilled labor of 1.05, indicating intermediate goods–skill complementarity. Second, at the disaggregated level, such complementarity is primarily observed in heavy manufacturing industries and the service sector, whereas complementarity is observed between intermediate goods and unskilled labor in the primary sector and light manufacturing industries. Third, the normalization of the data and the cumulant estimators exhibit stronger results. Fourth, our baseline results are confirmed applying several robustness checks, such as switching skilled and unskilled labor or considering capital–skill complementarity. Finally, intermediate goods–skill complementarity tends to be higher for industries that use more imported intermediate goods. [ABSTRACT FROM AUTHOR]

We estimate the elasticity of substitution between high-skill and low-skill workers using panel data from 32 countries during 1970–2015. Most existing estimates, which are based only on US microdata, find a value close to 1.6. We bring international data together with a theory-informed macro-approach to provide new evidence on this important macroeconomic parameter. Using the macro-approach, we find that the elasticity of substitution between tertiary-educated workers and those with lower education levels falls between 1.7 and 2.6, which is higher than previous estimates but within a plausible range. In some specifications, estimated elasticity is above the value required for strong skill-bias of technology, suggesting strong skill-bias is possible. [ABSTRACT FROM AUTHOR]

Copyright of Desenvolvimento e Meio Ambiente is the property of Universidade Federal do Parana and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Economic History Research / Investigaciones de Historia Económica is the property of Asociacion Espanola de Historia Economica and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Major changes have taken place in the agricultural factor input structure in China, which will inevitably affect fertilizer input in agriculture. However, there is no consistent conclusion about the impact of capital and labor input on chemical fertilizer input. This paper employed directed acyclic graphs (DAGs) to clarify the influence of capital-labor input structure on the use of chemical fertilizer. Using inter-provincial panel data, the dynamic panel system GMM method was adopted to examine the mechanism of factor substitution elasticity in determining the impact of agricultural capital-labor input on chemical fertilizer input. The results showed that agricultural labor and capital input are positively correlated with chemical fertilizer input. In the process of capital and labor input affecting fertilizer input, the elasticity of factor substitution plays a negative moderating role. From 1996 to 2018, the trend of capital replacing labor was evident, and the increase ratio of capital input was greater than the decrease ratio of labor input. Therefore, an increase in capital input and its substitution for labor is the main driver of the increase in fertilizer input. At the same time, the elasticity of fertilizer-capital substitution declined during the period 1996–2018, thereby reinforcing the increase in fertilizer input caused by the increase in capital input. In order to reduce agricultural pollution caused by the increase in chemical fertilizer input, it is crucial to reverse the declining trend in the elasticity of fertilizer capital substitution. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this study is to examine whether the elasticity of substitution (ES) varies between developed and developing countries. Design/methodology/approach: The author derives the growth regressions from the Solow model under the constant elasticity of substitution production function by using the first-order Taylor series expansion and estimate them for each country group classified based on time-varying behavior of income per worker using the data-driven algorithm. Findings: The ES is not unitary and varies among country groups. Developed countries generally have a higher ES than developing countries. Originality/value: For the first time, the author uses the first-order Taylor series expansion to linearize the steady-state value of income per worker, as the author considers this approach to be relatively more straight-forward and tractable. Furthermore, the author estimates the equations using both cross-section and panel data techniques and employs the data-driven algorithm proposed by Phillips and Sul (2007) to classify countries. [ABSTRACT FROM AUTHOR]

Fertilizer has brought great pressure to sustainable ecological environment. Research on the effect of price on fertilizer use as well as the substitution relationship of fertilizer and other input factors of agricultural production is of great importance for green, efficient, and intensive agricultural production in the world. This study first constructs translog cost functions and models of elasticity, then uses the factor input and price data from 2004 to 2016 to measure the price elasticity of fertilizer demand, and the elasticity of factor substitution in China's maize and cabbage production. The results suggest that: the price elasticity of fertilizer demand is in a low elasticity range; there is a compensation relationship between fertilizer and labour and a substitution relationship between fertilizer and machinery in China's maize production, while these relationships in China's cabbage production are opposite. [ABSTRACT FROM AUTHOR]

This study applies a translog cost function model to analyze the culture costs and the use of input factors among three groups of hard clam farmer households in Yunlin County, Taiwan, with different survival rates (low‐intermediate, intermediate‐high, and high). The study found that farmer household production in the three observed groups all exhibited economies of scale and could significantly expand the scale of production to lower the average cost. For farmer households with high survival rates, production cost could be reduced by 2.16% by a 10% increase in output. Moreover, the study shows that the survival rate–cost interaction values of farmer households in the intermediate‐high and low‐intermediate survival rate clusters were negative. Therefore, any increase in the survival rate could help lower the culture cost of farmer households. For low‐intermediate farmers, the survival rate–cost interaction value was the most negative; any increase in the survival rate by 10% would decrease the cost per hectare by NT$23,424. For high survival‐rate households, seeding and capital were substitutes, and seeding and feed were complements. As such, farmers would reduce the use of seeding factors when increasing the use of capital and decreasing the use of feed. [ABSTRACT FROM AUTHOR]

This article uses time-use and household expenditure data to measure the substitutability between time and money within the Beckerian household production framework. The elasticity of substitution is estimated for five commodity groups and across two developing countries: Ecuador and Guatemala. The estimated elasticities are positive, indicating substitutability, and much larger for all other goods compared to food. Our results raise some interesting questions regarding the policy effects of an intervention that does not consider the money/time trade-offs in consumption. [ABSTRACT FROM AUTHOR]

We provide a general theoretical characterization of how firms' technology choice on a technology frontier determines the long-run elasticity of substitution between capital and labour. We show that the shape of the frontier determines factor shares and the elasticity of substitution between capital and labour. If there are adjustment costs to technology choice, the short- and long-run elasticities differ, with the long-run always higher. If the technology frontier is log-linear, the production function becomes Cobb–Douglas in the long run but, consistent with empirical evidence, short-run dynamics are characterized by gross complementarity. The approach is easily implementable and yields a powerful way to introduce CES-type production functions in macroeconomic models. We provide an illustration within an estimated dynamic general equilibrium model and show that the use of our production technology provides a good match for the short- and medium-run behaviour of the U.S. labour share. [ABSTRACT FROM AUTHOR]

In Appl. Econ. Lett. 18 (2011), 1777–1784, as a natural generalization of some famous production models with two inputs, C.A. Ioan and G. Ioan introduced a new class of production functions with constant return to scale, calledsum production function, and proved three theorems of characterization for such production models. In this article, we give new and more simple proofs of these theorems, extending also the results to the case of increased/decreased return to scale. The generalization to the case of an arbitrary number of inputs is also discussed. [ABSTRACT FROM PUBLISHER]

In previous work, we estimated a dynamic model of the Italian economy, showing that its weakness in the past two decades is mainly due to the slowdown in total factor productivity growth. In those models, two parameters play a key role: technological progress and the elasticity of substitution. Recent estimates of those parameters are affected, in our opinion, by a specification problem: technological parameters are inherently long-run but their estimates are based on short-run data. Looking deeply into the estimation procedure, we show that the misspecification issue present in the estimates gives rise to a spurious regression bias (high R2, low DW), because the standard approach does not incorporate frictions and rigidities. Our modeling strategy takes account of them. Although we cannot in general say that our framework gets rid of the serial correlation problem, the statistics for our model do show that residuals are not serially correlated. [ABSTRACT FROM AUTHOR]

In this paper, we examine the influence of monetary policy on the speed of convergence in a standard monetary growth model à la Sidrauski allowing for differences in the elasticity of substitution between factors of production. The respective changes in the rate of convergence and its sensitivities to the central model parameters are derived both analytically and numerically. By normalizing the constant elasticity of substitution (CES) production functions both outside the steady state and within the steady state, it is possible to distinguish between an efficiency and a distribution effect of a change in the elasticity of substitution. We show that monetary policy is the more effective, the lower is the elasticity of substitution, and that the impact of monetary policy on the speed of convergence is mainly channeled via the efficiency effect. [ABSTRACT FROM AUTHOR]

Considerable efforts have been made to estimate the relationship between energy and non-energy inputs in the production process. However, it remains controversial whether energy and non-energy inputs are complements or substitutes. Empirical analysis is conflicting on this issue. This study seeks to explore an alternative way to explain these conflicting results by examining the issue from the perspective of energy efficiency. This study is based on time series data for capital, labor, and energy from 28 Chinese provinces, covering 1985 to 2012. The results show that capital and energy are substitutes in all of the provinces, whereas labor and energy are complements in most of the provinces. Using the threshold effect model, we discover evidence of a threshold point based on the amount of energy efficiency activity in a province. This point separates the substitution behavior of provinces between energy and non-energy inputs. Low-energy efficiency provinces do not substitute as readily as high-energy efficiency provinces. The findings imply that the energy-saving technologies should be applied in provinces with comparatively higher energy intensity because they have more energy conservation potential. [ABSTRACT FROM AUTHOR]

We propose a representation of individual preferences with a subsistence requirement in consumption, and examine its implications for substitutability and sustainability. Specifically, we generalize the standard constant-elasticity-of-substitution (CES) utility specification for manufactured goods and environmental services, by adding a subsistence requirement for environmental services. We find that the Hicksian elasticity of substitution strictly monotonically increases with the consumption of environmental services above the subsistence requirement, and approaches the standard CES value as consumption becomes very large. Whether the two goods are market substitutes depends on the level of income. We further show that the subsistence requirement may jeopardize the existence of an intertemporally optimal and sustainable consumption path. Our results have important implications for growth, development and environmental policy. [ABSTRACT FROM AUTHOR]

Although a realistic characterization of the production function is critical to macroeconomic analysis, estimating the function's characteristics is hampered by both data limitations and methodological difficulties. In this paper, I develop a new empirical strategy for estimating the CES production function with biased technical change. The proposed method extends the control function approach to the CES specification to address endogeneity concerns and is able to retrieve sector-specific and time-varying estimates of technical change. Using data from U.S. manufacturing industries, I find evidence that (i) the production technology exhibits nonincreasing returns to scale, (ii) the elasticity of substitution between capital and labor is below unity, and (iii) technical change is generally labor-augmenting along the balanced growth path. [ABSTRACT FROM AUTHOR]

This paper analyzes the effect of learning by doing (LBD) on the firm’s productivity growth and its input demand decisions. The results indicate that LBD is an important determinant of the firm’s productivity growth. The contribution of LBD to the firm’s productivity growth is about 5.6%. Another observation is that LBD has a decreasing effect on the firm’s cost of production – a finding which is consistent with the results of many studies. Also, an increase in LBD measured by cumulative production increases the firm’s demand for capital, and decreases the firm’s demand for labor. Lastly, LBD has a significant effect on the firm’s elasticity of scale. A fundamental message derived from the study is the confirmation that the firms should invest in more large capital equipment, embark on new processing techniques, and create an environment that is conducive to on-the-job learning. [ABSTRACT FROM PUBLISHER]

This article estimates the capital–energy Allen elasticities of substitution in China’s 28 provinces over the period 1995–2011. The central finding is that the capital–energy substitution elasticity in each province exhibits significant heterogeneity. The article empirically analyses the sources of the differences in the capital–energy substitution elasticity. The embodied technical change and market distortions are found to have significant effects on the degree of substitution elasticity. Further factor market reforms, liberalisation and cooperation would improve the elasticity of capital–energy substitution. [ABSTRACT FROM PUBLISHER]

A large body of economic literature has established that the primary purpose of any firm assuming unitary and constant elasticity of substitution of production inputs, among other necessary conditions, is profit maximization. However, the prevailing operating conditions of the micro enterprises raise concerns about the applicability of this formalization. Through an empirical study for Mexico using a four-input translog function (capital, labor, energy and supplies), and based on cross-sectional data, we find that the elasticities of substitution between production inputs are not unitary; in fact, some of them are complementary. This forces us to consider that instead of seeking to maximize profits, some types of micro enterprises are looking to optimize their installed capacity or achieve financial survival of the owner and their family, thus relaxing the foundations of economic analysis for the very small-scale and nascent micro enterprises. [ABSTRACT FROM AUTHOR]

This paper examines the effect of the elasticity of substitution between public and private inputs on the optimal fiscal policy, long-run growth and welfare. To this end, we consider an endogenous growth model with productive public spending. If the baseline government size is suboptimally low (high), the higher the elasticity of substitution the higher (lower) are the optimal government size and, in the presence of congestion, the optimal income tax. In any case, the higher the elasticity of substitution the higher are the optimal long-run growth rate and welfare. [ABSTRACT FROM AUTHOR]

Despite substantial interest in the role of energy in the economy, the degree of substitutability between energy and other production inputs and the way energy should be included in the production function remain unresolved issues. This study provides industry-level parameter estimates of two-level constant elasticity of substitution (CES) functions that include capital, labor and energy inputs and allow for technological change, for Canada. In contrast to many existing studies, we do not impose prior restrictions on the order of input nesting, and we report the estimates for three possible specifications. We find that a nested production structure, which first combines labor and energy into a composite good that is then combined with capital, fits the Canadian data best, in terms of respecting the restrictions imposed by cost minimization. We also find rather low elasticities of substitution between capital and labor, and limited evidence of exogenous technological change. [ABSTRACT FROM AUTHOR]

Motivated by a monopolistic competition model with market segmentation and international price discrimination, this paper analyzes whether there is an inverse relation between the elasticity of substitution and final ad valorem anti-dumping duties across products. We test this for 19 countries using data on anti-dumping from the Global Antidumping Database and US data at the 6-digit HS product level for the elasticity of substitution from Broda and Weinstein (Q J Econ 121(2):541-585, ). The results in our empirical investigation support a negative relation between the elasticity of substitution and the final ad valorem anti-dumping duties. [ABSTRACT FROM AUTHOR]

This paper analyzes the optimal fiscal policy in an endogenous growth model with productive public services. Government expenditure, which may be subject to different degrees of congestion, is financed by distortionary income taxation. The standard result on the equality between the growth-maximizing, welfare-maximizing and first-best income tax rates holds if and only if production is Cobb-Douglas or there is proportional congestion. With non-proportional (or in the absence of) congestion, the first-best income tax is lower than the (second-best) welfare-maximizing income tax which, in turn, is lower than the growth-maximizing income tax if the elasticity of substitution is below unity. Under mild conditions these relations are reversed if the elasticity of substitution is above unity. Intuition on these results is also provided. [ABSTRACT FROM AUTHOR]

We provide industry-level estimates of the elasticity of substitution (σ) between capital and labor in the United States. We also estimate rates of factor augmentation. Aggregate estimates are produced. Our empirical model comes from the first-order conditions associated with a constant–elasticity of substitution production function. Our data represent 35 industries at roughly the 2-digit SIC level, 1960–2005. We find that aggregate U.S. σ is likely less than 0.620. σ is likely less than unity for a large majority of individual industries. Evidence also suggests that aggregate σ is less than the value-added share-weighted average of industry σ's. Aggregate technical change appears to be net labor–augmenting. This also appears to be true for the large majority of individual industries, but several industries may be characterized by net capital augmentation. When industry-level elasticity estimates are mapped to model sectors, the manufacturing sector σ is lower than that of services; the investment sector σ is lower than that of consumption. [ABSTRACT FROM AUTHOR]

We develop a framework for measuring and analyzing medium-run departures from balanced growth, and apply it to developments in the euro area. A time-varying factor-augmenting production function (mimicking directed technical change) with below-unitary substitution elasticity is shown to account for the observed dynamics of factor incomes shares, TFP growth, and its components. Based on careful data accounting, we also identify a rising markup and the importance of financial-market regulations in the 1970s. The balanced growth path emerges as a special (and testable) case of our framework, as do existing strands of medium-run debates. [ABSTRACT FROM AUTHOR]

This article introduces a supply-side perspective to the study of counterterrorism, where terrorists are viewed as combining terrorist attacks to achieve an aggregate output (e.g. social anxiety). With this novel approach, the elasticity of substitution, associated with the terrorists' production function, becomes a key determinant of the effectiveness of deterrence. If this elasticity is large, then countermeasures have very limited effectiveness when directed at a single mode of attack. If, in contrast, attack modes are complements, focused countermeasures can completely eliminate terrorists' gains. Counterterrorism measures are more effective when terrorist campaigns display little diversity of attacks. The article also identifies when proactive policies are more effective than defensive policies. The supply-side perspective gives a new pessimistic view to benevolence, which reduces the cost of nonterrorist activities. [ABSTRACT FROM AUTHOR]

This paper examines the effect of globalization accelerated by an expansion in trade and foreign direct investment (FDI) on the national labor demand under an open economy with underemployment. We find that the higher the elasticity of substitution, the flatter the tangent slope of the labor demand curve under a trade economy (without FDI). If the wage level at home is much higher than that in a foreign country, an increase in the elasticity of substitution decreases domestic employment. The beginning of FDI with international production relocation makes the tangent slope of the home labor demand curve flatter than that under a trade economy. If the home wage falls within the high (low) range, FDI decreases (increases) home employment. This result implies that, in agreement with the conventional wisdom, FDI does not necessarily lead to the hollowing out of employment in a high-wage country. [ABSTRACT FROM AUTHOR]

This paper reviews and summarizes most of the literature on the environmental Kuznets curve (EKC), focusing mainly on disentangling and clarifying the key concepts underlying the two classes of existing theoretical explanations for the EKC occurrence -- those driven by technology and those driven by preferences -- as well as the technical formalization of such concepts. To do this, we develop a model which allows the analysis of the two types of theoretical explanations under a common theoretical framework. Using this analytical setting, we first review models with technology as the main driver of the EKC, and then we study those with preferences as the fundamental driver. Finally, we present a closed form solution for the EKC which, on the one hand, is simpler and less restrictive than previous ones in the literature and, on the other hand, helps us to highlight some of the remaining theoretical gaps and to propose some possibilities for future research. [ABSTRACT FROM AUTHOR]

This paper provides a unified approach to characterizing the relation between factor substitution and economic growth in different one-sector growth models (namely, the Solow, Ramsey, and Diamond models). Our main finding is that if better factor substitution raises savings in the steady state, then a higher per capita income results. There are two channels by which factor substitution affects savings: the positive efficiency effect via income and the ambiguous distribution effect via factor income shares. If the efficiency effect dominates, then a higher elasticity of substitution leads to a higher level of per capita steady-state income. In transition, factor substitution affects the rate of convergence both directly and through the equilibrium profit share. The former arises from diminishing marginal productivity of capital whereas the latter reflects its relative scarcity. Depending on the interaction of these effects, the net outcomes are characterized. [ABSTRACT FROM AUTHOR]

This study employs a novel nested variable elasticity of substitution (VES) utility model to investigate the impacts of food safety standards on international trade and social welfare. The nested VES utility model is applied to investigate the impact of the European Union (EU) Hazard Analysis Critical Control Point (HACCP) standard on EU orange juice (OJ) trade and social welfare. Our results show that the standard's impact on trade and welfare is underestimated when the elasticity of substitution is restricted to be constant. Our findings indicate that the implementation of the EU HACCP standard increases EU OJ imports as well as consumer welfare. We also find that the EU HACCP standard has a greater impact on intra-EU OJ imports than on extra-EU OJ imports. [ABSTRACT FROM PUBLISHER]

We estimate the world elasticity of substitution between labor types on a very well-known data set. Using enrollment ratios and government expenditures on education as instruments, the plausible elasticities varying from 2.00 to 3.21 for the 'college-completed' definition suggests imperfect substitution between skilled and unskilled labor. Considerably higher values are found for the 'secondary' and 'primary-completed' definitions. Overall, the higher the threshold for defining skilled labor, the lower the elasticity and less likely is the switch between types of labor. These findings complement micro-evidence and support stronger links between productivity and output for the 'college educated' labor definition. [ABSTRACT FROM AUTHOR]

This paper presents a new class of production functions with a changing elasticity of substitution between two input factors. Over a freely chosen number of intervals for the input factor intensity freely chosen elasticities of substitution can be imposed. The resulting production function can thus account for changing elasticities of substitution during the development of the factor intensity. The production function is applied in a calibration exercise and a novel normalization procedure is proposed. The theory behind this production technology builds on the functional normalization of CES production functions. [ABSTRACT FROM AUTHOR]

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We analyze a generalized neoclassical growth model that combines a normalized CES production function and possible asymmetries of savings out of factor incomes. This generalized model helps to shed new light on a recent debate concerning the impact of factor substitution and income distribution on economic growth. We show that this impact relies on both an efficiency and a distribution effect, where the latter is caused by the distributional consequences of an increase in the elasticity of substitution. While the efficiency effect is always positive, the sign of the distribution effect depends on the particular savings hypothesis. If the savings rate out of capital income is substantial so that a certain threshold value is surpassed, the efficiency effect dominates and higher factor substitution accelerates the accumulation of capital and works as a major engine of growth. [ABSTRACT FROM AUTHOR]

Elasticity of substitution and returns to scale are estimated on a sectoral basis for South Africa using panel-based generalised least square procedure. Apart from sectoral differences in terms of elasticity of substitution, the study found that elasticity of substitution is below unity in all of the sectors. Most of the sectors studied are found to have increasing returns to scale in production. The study further explores the implications of elasticity of factor substitution and returns to scale on growth and employment creation. It is argued that a greater number of jobs can be created from growth of sectors with constant or decreasing returns to scale than from the same level of output growth generated by sectors with increasing returns to scale. This is the case when the employment-creating potential of the same amount of additional output is compared in all the sectors examined. By virtue of scale economies, a sector like finance, insurance, real estate and business services generates more output with less proportional increase in inputs, which means growth in this sector may not have the desired impact on job creation. However, given the sector's large share (20%) of the country's total output and employment, it may generate more jobs, even if sectors like utilities and construction experience the same level of output growth. Given its importance for growth and employment, the study recommends further investigation into the reasons why elasticity of substitution is lower in sectors like utilities, mining and trade, catering and accommodation services. [ABSTRACT FROM AUTHOR]

We show that the Hotelling–Lau elasticity of substitution, an extension of the Allen–Uzawa elasticity to allow for optimal output-quantity (or utility) responses to changes in factor prices, inherits all of the failings of the Allen–Uzawa elasticity identified by Blackorby and Russell [(1989) Am Econ Rev 79: 882–888]. An analogous extension of the Morishima elasticity of substitution to allow for output quantity changes preserves the salient properties of the original Hicksian notion of elasticity of substitution. [ABSTRACT FROM AUTHOR]

Copyright of Revista de Economia e Sociologia Rural is the property of Sociedade Brasileira de Economia e Sociologia Rural and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The famous '1956' contribution by Robert Solow was always thought to be central to positive, or descriptive, economic growth theory. We show that it is also at the core of optimal growth, because the Fisher equation of competitive equilibrium is nothing short of an Euler equation; it corresponds to the maximization of the sum of discounted consumption flows. From this equation an optimal savings rate results with reasonable, very reachable values. We also show the importance of the elasticity of substitution: there is a threshold value of this parameter leading to a permanent growth rate of income per person that is above the labour-augmenting rate of technical progress, and that rate does depend upon the investment-saving ratio. [ABSTRACT FROM AUTHOR]

The paper argues that a Cobb-Douglas specification may be a reasonable description of the Finnish aggregate production function when a sufficiently long time period (the 20th century) is considered. It is, however, a misleading description of the production technology for the post- WWII period. Controlling for biased technical change, the elasticity of substitution is significantly below one, close to 0.5, during 1945-2003. Given that similar results have been obtained for the U.S. economy, the analysis shows that the value of the elasticity of substitution cannot be dependent on some specific structure of economic institutions but is likely to reflect more general aspects of technology and production. [ABSTRACT FROM AUTHOR]

Elasticity of substitution was introduced into economics during the early 1930s. It was discovered independently by Hicks in The Theory of Wages and by Joan Robinson in The Economics of Impeifect Competition, and then was the centre of a polemic involving Kahn and Sraffa, among others. The debate focused on imperfect competition and capital-theoretical issues. Some elements of the 1950s and 1960s capital theory controversy, such as the idea of capital as a Giffen good or the difficulties of measuring capital, were already discussed at this early stage. [ABSTRACT FROM AUTHOR]

The Allen elasticity of substitution (AES) is widely used to study monetary-asset substitution and structural demand stability. Blackorby and Russell showed that the AES is uninformative and that the Morishima elasticity of substitution (MES) is the appropriate measure, a point overlooked in the monetary literature. Use of improper measures can lead to incorrect inferences This article considers five alternative measures of substitution—the AES, the MES. the Hicksian and Marshallian elasticities of demand, and Mundlak's unencountered, but appealing, constant-cost elasticity of substitution. Selection of the substitution measure appropriate to respective research questions is addressed. [ABSTRACT FROM AUTHOR]

This paper examines the cross-sectional effect of inflation on the investment and employment decisions. The paper shows that more heavily capitalized firms tend to have a greater reduction in the capital-labor ratio during an inflationary period. The paper also shows that firms with a higher cost of debt to wage ratios and a larger amount of depreciation shelter tend to use more labor in the inflationary period. Empirical results are generally consistent with these arguments. [ABSTRACT FROM AUTHOR]

A central issue in improving construction productivity is the flexibility in which capital and labour may be substituted. Empirical estimation using Singapore data suggests that the hypothesis of a unitary elasticity of substitution cannot be rejected, thereby providing justification for policy measures to alter the relative prices of factor inputs to encourage mechanisation in construction. The finding is consistent with an earlier study on the American construction industry as well as numerous production function studies conducted for other industries. [ABSTRACT FROM AUTHOR]