An Estimation of Industry-Level Capital-Labor Substitution Elasticities for U.S. Production

Download or read book An Estimation of Industry-Level Capital-Labor Substitution Elasticities for U.S. Production written by Edward J. Balistreri and published by . This book was released on 2002 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: A key parameter that determines the distributional impacts of a policy shift in general equilibrium simulations is the elasticity of substitution between capital and labor. Using a rich new data set by the Bureau of Economic Analysis, we estimate substitution elasticities for 28 industries and provide an indication of the long- and short-run estimates. Given the structure of most growth models, we posit that the relationship between capital and labor is likely to be close to Cobb-Douglas. Our findings lend support to the Cobb-Douglas specification as a transparent starting point in simulation analysis.