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Factor Substitution, Mechanization, And Economic Growth

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  • HIDEKI NAKAMURA

Abstract

This paper tries to explain the polarization of economic growth through mechanization. We derive a complementary relationship between capital accumulation and mechanization. While we assume an external effect that occurs as a result of mechanization, given the external effect, mechanization yields a constant‐elasticity‐of‐substitution production function in which the elasticity‐of‐substitution is greater than unity as the envelope of Cobb–Douglas production functions. When mechanization is difficult, which implies a low value for the elasticity‐of‐substitution, and the external effect is weak, there is potential for multiple steady states to exist.

Suggested Citation

  • Hideki Nakamura, 2010. "Factor Substitution, Mechanization, And Economic Growth," The Japanese Economic Review, Japanese Economic Association, vol. 61(2), pages 266-281, June.
    • Handle: RePEc:bla:jecrev:v:61:y:2010:i:2:p:266-281
    DOI: 10.1111/j.1468-5876.2009.00486.x
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    Cited by:

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    2. Kemnitz, Alexander & Knoblach, Michael, 2020. "Endogenous sigma-augmenting technological change: An R&D-based approach," CEPIE Working Papers 02/20, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    3. Hideki Nakamura & Joseph Zeira, 2024. "Automation and unemployment: help is on the way," Journal of Economic Growth, Springer, vol. 29(2), pages 215-250, June.
    4. Antony, Jürgen, 2014. "Technical change and the elasticity of factor substitution," Beiträge der Hochschule Pforzheim 147, Pforzheim University.

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