The Microeconomic Foundations of Aggregate Production Functions

David Baqaee and Emmanuel Farhi

No 25293, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Aggregate production functions are reduced-form relationships that emerge endogenously from input-output interactions between heterogeneous producers and factors in general equilibrium. We provide a general methodology for analyzing such aggregate production functions by deriving their first- and second-order properties. Our aggregation formulas provide non-parameteric characterizations of the macro elasticities of substitution between factors and of the macro bias of technical change in terms of micro sufficient statistics. They allow us to generalize existing aggregation theorems and to derive new ones. We relate our results to the famous Cambridge-Cambridge controversy.

JEL-codes: E0 E1 E25 (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-eff and nep-mac
Note: EFG ITI ME PE
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Citations: View citations in EconPapers (7)

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Working Paper: The Microeconomic foundations of Aggregate Production Functions (2018)
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