Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/306477 
Year of Publication: 
2024
Series/Report no.: 
GLO Discussion Paper No. 1523
Publisher: 
Global Labor Organization (GLO), Essen
Abstract: 
I estimate a nested CES production function for 9 European countries over 1996- 2020 using EU KLEMS data, distinguishing between information and communication technologies (ICT), intellectual property (IP) capital, and traditional capital. I assume that the aggregate output is produced using labor and these capital types and allow for differences in the elasticities of substitution between labor, an aggregate of ICT and IP capital, and traditional capital. The estimated elasticity of substitution between ICT and IP capital is strictly below one implying gross complementarity. ICT and IP capital together are gross substitutes for labor while traditional capital is a gross complement. The results imply that the fast pace of technological progress and accumulation in ICT and IP capital are responsible for almost the entire fall in labor income share. The imputed labor-aggregate capital elasticity exceeds 1, rising from 1996 to 2008 and falling afterward.
Subjects: 
CES Production Function
Elasticities of Substitution
System of Equations
ICT
IP Capital
Traditional Capital
JEL: 
E22
E25
J23
O33
Document Type: 
Working Paper

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