Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18879
Authors: 
Chirinko, Robert S.
Fazzari, Steven M.
Meyer, Andrew P.
Year of Publication: 
2004
Series/Report no.: 
CESifo working papers 1240
Abstract: 
The elasticity of substitution between capital and labor features prominently in several areas of economic research. However, a consensus estimate remains elusive. We develop an estimation strategy that filters panel data in an original way and avoids several pitfalls - difficult-to-specify dynamics, transitory time-series variation, and positively sloped supply schedules - inherent in investment equations that can bias the estimated elasticity. Results are based on an extensive panel containing 1,860 manufacturing and non-manufacturing firms. Our model generates a precisely estimated elasticity of approximately 0.40. The method developed here may prove useful in estimating other structural parameters from panel datasets.
JEL: 
E22
H32
Document Type: 
Working Paper

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