EconStor >
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim >
ZEW Discussion Papers >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/24448
  
Title:Rejecting capital-skill complementarity at all costs PDF Logo
Authors:Frondel, Manuel
Schmidt, Christoph M.
Issue Date:2001
Series/Report no.:ZEW Discussion Papers 01-27
Abstract:Any serious empirical study of factor substitutability has to allow the data to display complementarity as well as substitutability. The standard approach reflecting this idea is a translog specification – this is also the approach used by numerous studies analyzing the relative capital-skill complementarity hypothesis formulated by GRILICHES (1969). According to this hypothesis, the degree of substitutability between skilled labor and capital is lower than that for unskilled labor and capital. Yet, the results of empirical studies investigating this hypothesis are controversial. This paper offers a straightforward explanation: Using a translog approach reduces the issue of factor substitutability or complementarity to a question of cost shares. Our review of translog studies mentioned in HAMERMESH?s (1993) summary on the demand for heterogeneous labor demonstrates that this argument is empirically relevant – all these studies can be reconciled with each other on the basis of the cost-share argument.
Subjects:Substitutability
Translog Cost Function
JEL:D2
C3
Document Type:Working Paper
Appears in Collections:ZEW Discussion Papers
Publikationen von Forscherinnen und Forschern des ZEW

Files in This Item:
File Description SizeFormat
dp0127.pdf132.21 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/24448

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.