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Constant-Elasticity-Of-Substitution Production Function

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  • Nakamura, Hideki
  • Nakamura, Masakatsu

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.

Suggested Citation

  • Nakamura, Hideki & Nakamura, Masakatsu, 2008. "Constant-Elasticity-Of-Substitution Production Function," Macroeconomic Dynamics, Cambridge University Press, vol. 12(5), pages 694-701, November.
    • Handle: RePEc:cup:macdyn:v:12:y:2008:i:05:p:694-701_07
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    References listed on IDEAS

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    Cited by:

    1. Growiec, Jakub, 2013. "Factor-augmenting technology choice and monopolistic competition," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 86-94.
    2. Rainer Klump & Peter McAdam & Alpo Willman, 2012. "The Normalized Ces Production Function: Theory And Empirics," Journal of Economic Surveys, Wiley Blackwell, vol. 26(5), pages 769-799, December.
    3. Growiec, Jakub, 2018. "Factor-specific technology choice," Journal of Mathematical Economics, Elsevier, vol. 77(C), pages 1-14.
    4. Ryosuke Shimizu & Shohei Momoda, 2020. "Does Automation Technology increase Wage?," KIER Working Papers 1039, Kyoto University, Institute of Economic Research.
    5. Nakamura, Hideki, 2009. "Micro-foundation for a constant elasticity of substitution production function through mechanization," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 464-472, September.
    6. Michael Knoblach & Fabian Stöckl, 2020. "What Determines The Elasticity Of Substitution Between Capital And Labor? A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 847-875, September.
    7. 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).
    8. Shimizu, Ryosuke & Momoda, Shohei, 2023. "Does automation technology increase wage?," Journal of Macroeconomics, Elsevier, vol. 77(C).
    9. 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.
    10. Ayad, Fayssal, 2023. "Mapping the path forward: A prospective model of natural resource depletion and sustainable development," Resources Policy, Elsevier, vol. 85(PA).
    11. Ryosuke Shimizu & Shohei Momoda, 2021. "Does Automation Technology increase Wage?," Discussion papers ron343, Policy Research Institute, Ministry of Finance Japan.
    12. Rao, T.V.S. Ramamohan, 2011. "CES as an Organizational Production Function," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 46(1), pages 69-81.
    13. Growiec, Jakub, 2013. "A microfoundation for normalized CES production functions with factor-augmenting technical change," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2336-2350.
    14. Hideki Nakamura, 2010. "Factor Substitution, Mechanization, And Economic Growth," The Japanese Economic Review, Japanese Economic Association, vol. 61(2), pages 266-281, June.
    15. Antony, Jürgen, 2014. "Technical change and the elasticity of factor substitution," Beiträge der Hochschule Pforzheim 147, Pforzheim University.

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