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| Title: | | The choice of CES production techniques and balanced growth  |
| Authors: | | León-Ledesma, Miguel A. Satchi, Mathan |
| Issue Date: | | 2011 |
| Series/Report no.: | | School of Economics discussion papers 11,13 |
| Abstract: | | We show that allowing firms a choice of CES production techniques (via the distribution parameter between capital and labor) can result in a new class of production functions that produces short-run capital-labor complementarity but yields a long-run unit elasticity of substitution. This is shown to occur if we provide a mathematical framework for this choice that maintains strict essentiality of the production process and satisfies the requirement of unit-invariance. The class of production functions derived are consistent with a balanced growth path even in the presence of capital-augmenting technical progress. The approach yields a simple yet powerful way of introducing CES-type production functions in macroeconomic models. |
| Subjects: | | balanced growth production technique biased technology elasticity of substitution |
| JEL: | | E25 O33 O40 |
| Document Type: | | Working Paper |
| Appears in Collections: | | School of Economics Discussion Papers, University of Kent
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