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Output, Investment, and Growth in a World of Putty-Clay: Working Paper 2007-07

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  • Mark Lasky

Abstract

This paper presents a putty-clay model of capital that proceeds from profit maximization to an analytic solution for aggregate investment that fits the data well. The key innovation is a production function in which a geometric average of the capital-labor ratio embedded in each unit of capital replaces the aggregate capital-labor ratio in the standard Cobb-Douglas production function. The accelerator in this model depends on the growth rate of output in excess of labor productivity at full employment, rather than on the growth rate of output alone as in previous work.

Suggested Citation

  • Mark Lasky, 2007. "Output, Investment, and Growth in a World of Putty-Clay: Working Paper 2007-07," Working Papers 18701, Congressional Budget Office.
    • Handle: RePEc:cbo:wpaper:18701
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