Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/50623
Authors: 
León-Ledesma, Miguel A.
Satchi, Mathan
Year of Publication: 
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

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