Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153435
Authors: 
León-Ledesma, Miguel A.
McAdam, Peter
Willman, Alpo
Year of Publication: 
2009
Series/Report no.: 
ECB Working Paper 1001
Abstract: 
Despite being critical parameters in many economic fields, the received wisdom, in theoretical and empirical literatures, states that joint identification of the elasticity of capital-labor substitution and technical bias is infeasible. This paper challenges that pessimistic interpretation. Putting the new approach of "normalized" production functions at the heart of a Monte Carlo analysis we identify the conditions under which identification is feasible and robust. The key result is that the jointly modeling the production function and first-order conditions is superior to single-equation approaches in terms of robustly capturing production and technical parameters, especially when merged with "normalization". Our results will have fundamental implications for production-function estimation under non-neutral technical change, for understanding the empirical relevance of normalization and the variability underlying past empirical studies.
Subjects: 
Constant Elasticity of Substitution
Factor Income share
Factor-Augmenting Technical Change
Identification
Monte Carlo
Normalization
JEL: 
C22
E23
O30
O51
Document Type: 
Working Paper

Files in This Item:
File
Size





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