Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-06T07:16:05.805Z Has data issue: false hasContentIssue false

CONSTANT-ELASTICITY-OF-SUBSTITUTION PRODUCTION FUNCTION

Published online by Cambridge University Press:  01 November 2008

Hideki Nakamura*
Affiliation:
Osaka City University
Masakatsu Nakamura
Affiliation:
Fukushima University
*
Address correspondence to: Hideki Nakamura, Faculty of Economics, Osaka City University, 3-3-138 Sugimoto, Sumiyoshi, Osaka, 558-8585, Japan; e-mail: [email protected].

Abstract

We consider endogenous changes of inputs from labor to capital in the production of intermediate goods, i.e., a form of mechanization. We derive complementary relationships between capital accumulation and mechanization by assuming a Cobb–Douglas production function for the production of final goods from intermediate goods. A constant-elasticity-of-substitution production function in which the elasticity of substitution exceeds unity can be endogenously derived as the envelope of Cobb–Douglas production functions when the efficiency of inputs is assumed in a specific form. The difficulty of mechanization represents the elasticity of substitution.

Type
Notes
Copyright
Copyright © Cambridge University Press 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Acemoglu, Daron and Zilibotti, Fabrizio (2001) Productivity differences. Quarterly Journal of Economics 116, 563606.CrossRefGoogle Scholar
Arrow, Kenneth J., Chenery, Hollis B., Minhas, Bagicha S., and Solow, Robert M. (1961) Capital-labor substitution and economic efficiency. Review of Economics and Statistics 43, 225250.CrossRefGoogle Scholar
Duffy, John and Papageorgiou, Chris (2000) A cross-country empirical investigation of the aggregate production function specification. Journal of Economic Growth 5, 87120.CrossRefGoogle Scholar
Galor, Oded and Mountford, Andrew (2004) Trading Population for Productivity. Mimeo, Brown University.Google Scholar
Jones, Charles I. (2005) The shape of production functions and the direction of technical change. Quarterly Journal of Economics 120, 517549.Google Scholar
Jones, Larry E. and Manuelli, Rodolfo (1990) A convex model of equilibrium growth: Theory and policy implications. Journal of Political Economy 98, 10081038.CrossRefGoogle Scholar
Nakamura, Hideki (2006) Micro Foundation for Constant-Elasticity-of-Substitution Production Function Through Mechanization. Mimeo, Osaka City University.Google Scholar
Sato, Kazuo (1975). Production functions and aggregation. Amsterdam: North-Holland.Google Scholar
Zeira, Joseph (1998) Workers, machines, and economic growth. Quarterly Journal of Economics 113, 10911117.CrossRefGoogle Scholar