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New measures of factor productivity in Australia: a Sato approach

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  • Anthony J. Makin
  • Sam Strong

Abstract

This article derives new results of the Elasticity of Substitution (ES) between capital and labour and factor productivity for Australia, an economy which experienced major economic reform that substantially increased the flexibility of its labour, product and capital markets throughout the 1980s and 1990s. It employs a Sato production function specification which has unique properties that enable the estimation of capital--labour substitution elasticity and changing marginal productivities through time. These estimates reveal that the substitution elasticity and labour productivity in Australia rose significantly from the mid-1960s and remained elevated during the economic reform period. A novel contribution of this article is the depiction of Australia's production isoquants to convey how combining labour and capital to produce real Gross Domestic Product (GDP) has changed over recent decades.

Suggested Citation

  • Anthony J. Makin & Sam Strong, 2013. "New measures of factor productivity in Australia: a Sato approach," Applied Economics, Taylor & Francis Journals, vol. 45(17), pages 2413-2422, June.
    • Handle: RePEc:taf:applec:45:y:2013:i:17:p:2413-2422
    DOI: 10.1080/00036846.2012.665603
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    References listed on IDEAS

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    1. Bliss, C. J., 1975. "Capital Theory and the Distribution of Income," Elsevier Monographs, Elsevier, edition 1, number 9780720436044 edited by Bliss, C. J..
    2. Wicksteed, Philip H., 1894. "An Essay on the Co-ordination of the Laws of Distribution," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 127, number wicksteed1894.
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    Cited by:

    1. Lenka Roubalová & Lenka Viskotová, 2019. "The Time Augmented Cobb-Douglas Production Function," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 67(5), pages 1347-1356.
    2. Asif, Zainab & Chinzara, Zivanemoyo & Lahiri, Radhika, 2023. "The role of risk and institutions in the adoption and diffusion of technologies: Evidence from Sub-Saharan Africa," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 16-33.
    3. Roubalová Lenka & Viskotová Lenka, 2018. "Productivity Development in Selected Central European Countries Measured by the Sato Production Function," Review of Economic Perspectives, Sciendo, vol. 18(4), pages 353-370, December.
    4. Ranjini L. Thaver, 2013. "Integrating The Output And Substitution Effects Of Production Into The Intermediate Microeconomics Textbook," Business Education and Accreditation, The Institute for Business and Finance Research, vol. 5(1), pages 81-90.

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