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Aggregate Production Functions Revisited: The Mobility of Capital and the Rigidity of Thought

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  • Franklin M. Fisher

Abstract

Past work on aggregation of production functions has focused on aggregation over firms where technology is embodied in fixed capital. This paper shows that much of the stringency of the necessary conditions for aggregation resides in the nature of aggregation over firms and not in the immobility of capital. Roughly, when capital is mobile, aggregation is permitted for any group of factors under the union of the conditions which otherwise applied to aggregation of fixed or aggregation of movable factors, respectively. No truly new conditions appear. The results are also interpreted in terms of output aggregation.

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  • Franklin M. Fisher, 1982. "Aggregate Production Functions Revisited: The Mobility of Capital and the Rigidity of Thought," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(4), pages 615-626.
    • Handle: RePEc:oup:restud:v:49:y:1982:i:4:p:615-626.
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    File URL: http://hdl.handle.net/10.2307/2297290
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    Cited by:

    1. Junko Doi & Takao Fujii & Shinya Horie & Jun Iritani & Sumie Sato & Masaya Yasuoka, 2021. "Construction of an Aggregated Economy - Aggregated TFP and Price Level -," Discussion Paper Series 228, School of Economics, Kwansei Gakuin University.
    2. David Baqaee & Emmanuel Farhi, 2018. "The Microeconomic Foundations of Aggregate Production Functions," NBER Working Papers 25293, National Bureau of Economic Research, Inc.
    3. Lin, Karen Jingrong & Karim, Khondkar E. & Carter, Clairmont, 2015. "Why does China's stock market have highly synchronous stock price movements? An information supply perspective," Advances in accounting, Elsevier, vol. 31(1), pages 68-79.
    4. Wall, Charles A. & Fisher, Brian S., 1988. "Supply Response and the Theory of Production and Profit Functions," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 56(03), pages 1-22, December.
    5. Eliasson, Gunnar, 1982. "On the Optimal Rate of Structural Adjustment," Working Paper Series 74, Research Institute of Industrial Economics.
    6. Jesus Felipe & Franklin M. Fisher, 2003. "Aggregation in Production Functions: What Applied Economists should Know," Metroeconomica, Wiley Blackwell, vol. 54(2‐3), pages 208-262, May.
    7. Piotr Pietraszewski, 2016. "Microeconomic fundamentals of the aggregate production function with constant returns to scale," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 45.

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