This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Growth, capital shares, and a new perspective on production functions

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Charles I. Jones

Additional information is available for the following registered author(s):

Abstract

Standard growth theory implies that steady-state growth in the presence of exponential declines in the prices of computers and other capital equipment requires a Cobb-Douglas production function. Conventional wisdom holds that capital shares are relatively constant, so that the Cobb-Douglas approach might be a good way to model growth. Unfortunately, this conventional wisdom is misguided. Capital shares exhibit substantial trends and fluctuations in many countries and in many industries. Taken together, these facts represent a puzzle for growth theory. This paper resolves the puzzle by (a) presenting a production function that exhibits a short-run elasticity of substitution between capital and labor that is less than one and a long-run elasticity that is equal to one, and (b) providing microfoundations for why the production function might take the Cobb-Douglas form in the long run.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sf.frb.org/economics/conferences/0311/rich.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Article provided by Federal Reserve Bank of San Francisco in its journal Proceedings.

Volume (Year): (2003)
Issue (Month): Nov ()
Pages:
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:fip:fedfpr:y:2003:i:nov:x:2

Contact details of provider:
Postal: P.O. Box 7702, San Francisco, CA 94120-7702
Phone: (415) 974-2000
Fax: (415) 974-3333
Email:
Web page: http://www.frbsf.org/
More information through EDIRC

Order Information:
Email:
Web: http://www.frbsf.org/popups/fiporder.html

For technical questions regarding this item, or to correct its listing, contact: (Diane Rosenberger).

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Chang-Jin Kim & Christian J. Murray, 2002. "Permanent and transitory components of recessions," Empirical Economics, Springer, vol. 27(2), pages 163-183. [Downloadable!] (restricted)
  2. Gordon, Robert J, 2000. "Does the 'New Economy' Measure up to the Great Inventions of the Past?," CEPR Discussion Papers 2607, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991. "Stochastic trends and economic fluctuations," Working Paper Series, Macroeconomic Issues 91-4, Federal Reserve Bank of Chicago.
    Other versions:
  4. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  5. Campbell, John Y & Mankiw, N Gregory, 1987. "Are Output Fluctuations Transitory?," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 857-80, November. [Downloadable!] (restricted)
    Other versions:
  6. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March. [Downloadable!] (restricted)
  7. Casey B. Mulligan, 2002. "A Century of Labor-Leisure Distortions," NBER Working Papers 8774, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November. [Downloadable!] (restricted)
    Other versions:
  9. Kevin J. Stiroh, 2002. "Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?," American Economic Review, American Economic Association, vol. 92(5), pages 1559-1576, December. [Downloadable!]
    Other versions:
  10. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-62, June. [Downloadable!] (restricted)
    Other versions:
  11. Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 149-163, April. [Downloadable!] (restricted)
  12. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Business cycle accounting," Working Papers 625, Federal Reserve Bank of Minneapolis.
    Other versions:
  13. Carol Corrado & Lawrence Slifman, 1999. "Decomposition of Productivity and Unit Costs," American Economic Review, American Economic Association, vol. 89(2), pages 328-332, May. [Downloadable!] (restricted)
    Other versions:
  14. Blanchard, Olivier J, 1981. "What Is Left of the Multiplier Accelerator?," American Economic Review, American Economic Association, vol. 71(2), pages 150-54, May. [Downloadable!] (restricted)
  15. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November. [Downloadable!] (restricted)
  16. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  17. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," Cowles Foundation Discussion Papers 870, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  18. Bai, Jushan & Lumsdaine, Robin L & Stock, James H, 1998. "Testing for and Dating Common Breaks in Multivariate Time Series," Review of Economic Studies, Blackwell Publishing, vol. 65(3), pages 395-432, July. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Luciano Fanti & Luca Gori, 2008. "Longevity and PAYG pension systems sustainability," Economics Bulletin, Economics Bulletin, vol. 10(2), pages 1-8. [Downloadable!]
  2. John Fernald & Brent Neiman, 2003. "Measuring productivity growth in Asia: do market imperfections matter?," Working Paper Series WP-03-15, Federal Reserve Bank of Chicago. [Downloadable!]
  3. Luciano Fanti & Luca Gori, 2008. "‘Backyard’ technology and regulated wages in a neoclassical OLG growth model," Discussion Papers 2008/74, Dipartimento di Scienze Economiche (DSE), University of Pisa, Pisa, Italy. [Downloadable!]
  4. John Fernald & Brent Neiman, 2006. "Measuring the miracle: market imperfections and Asia's growth experience," Working Paper Series 2006-17, Federal Reserve Bank of San Francisco. [Downloadable!]
    Other versions:
  5. Alberto Bucci, 2006. "Product Market Competition, R&D Effort and Economic Growth," DEGIT Conference Papers c011_037, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
    Other versions:
  6. Luciano Fanti & Luca Gori, 2008. "Fertility-related pensions and fertility disincentives," Economics Bulletin, Economics Bulletin, vol. 10(8), pages 1-7. [Downloadable!]
  7. Luciano Fanti & Luca Gori, 2008. "Human capital, income, fertility and child policy," Economics Bulletin, Economics Bulletin, vol. 9(7), pages 1-7. [Downloadable!]
  8. Hiau Looi Kee, 2004. "Estimating Productivity When Primal and Dual TFP Accounting Fail: An Illustration Using Singapore's Industries," Topics in Economic Analysis & Policy, Berkeley Electronic Press, vol. 4(1), pages 1193-1193. [Downloadable!] (restricted)
  9. Arpaia, Alfonso & Pérez, Esther & Pichelmann, Karl, 2009. "Understanding labour income share dynamics in Europe," MPRA Paper 15649, University Library of Munich, Germany. [Downloadable!]
  10. Simone Bertoli & Francesco Farina, 2007. "The functional distribution of income: a review of the theoretical literature and of the empirical evidence around its recent pattern in European countries," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 005, Department of Economic Policy, Finance and Development (DEPFID), University of Siena. [Downloadable!]
  11. Pedro S. Amaral & Erwan Quintin, 2005. "Finance Matters," Macroeconomics 0502007, EconWPA. [Downloadable!]
    Other versions:
  12. Rainer Klump & Peter McAdam & Alpo Willman, 2004. "Factor Substitution and Factor Augmenting Technical Progress in the US: A Normalized Supply-Side System Approach," DEGIT Conference Papers c009_030, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
    Other versions:
  13. Davide Fiaschi - Matteo Marsili, 2009. "Distribution of Wealth and Incomplete Markets: Theory and Empirical Evidence," Discussion Papers 2009/83, Dipartimento di Scienze Economiche (DSE), University of Pisa, Pisa, Italy. [Downloadable!]
  14. Pietro Peretto & John J. Seater, 2006. "Augmentation or Elimination?," DEGIT Conference Papers c011_060, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
Statistics
Access and download statistics

Did you know? Use the JEL tree to browse through the database by subfields.

This page was last updated on 2009-10-20.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.