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A cross-country non parametric estimation of the returns to factors of production and the elasticity of scale

Author

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  • Adalmir Marquetti

    (PUC-RS)

Abstract

This paper employs local regression to estimate the output elasticity with respect to labor, human capital, physical capital and the elasticity of scale for 90 countries in 1985 and 1995. The results support the hypotheses of constant returns to scale to factors and decreasing returns to accumulable factors. The low capital-labor ratio countries have important differences in factor elasticities in relation to other countries. The augmentation of the production function by human capital did not reduce the elasticity of physical capital as suggested by Mankiw, Romer and Weil (1992). Moreover, it is investigated if the factors shares are really equal to their output elasticity. The wage share raises with the capital labor ratio and the sum of the output elasticity of labor and human capital is below the wage share for high capital labor ratio countries, happening the inverse for low capital labor ratio countries. It indicates the presence of externalities, or imperfect competition or that the marginal theory of distribution is inaccurate.

Suggested Citation

  • Adalmir Marquetti, 2007. "A cross-country non parametric estimation of the returns to factors of production and the elasticity of scale," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 17(1), pages 95-126, January-A.
    • Handle: RePEc:nov:artigo:v:17:y:2007:i:1:p:95-126
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    More about this item

    Keywords

    elasticity of output; elasticity of scale; wage share;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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