A microfoundation for normalized CES production functions with factor-augmenting technical change

Jakub Growiec

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 11, 2336-2350

Abstract: Based on a tractable “endogeneous technology choice” framework, we provide a microfoundation for aggregate normalized constant elasticity of substitution (CES) production functions with non-neutral, factor-augmenting technical change. In this framework, firms are allowed to choose unit productivities of capital and labor optimally from a technology menu constructed under the assumption that unit factor productivities (UFPs) are independently Weibull-distributed. The Weibull distribution itself is also microfounded here: based on extreme value theory, it is found to be an accurate and robust approximation of the true UFP distribution if technologies consist of a large number of complementary components.

Keywords: CES production function; Weibull distribution; Optimal technology choice; Direction of technical change; Directed R&D (search for similar items in EconPapers)
JEL-codes: E23 E25 O47 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (47)

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Related works:
Working Paper: A Microfoundation for Normalized CES Production Functions with Factor-Augmenting Technical Change (2011)
Working Paper: A microfoundation for normalized CES production functions with factor-augmenting technical change (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:11:p:2336-2350

DOI: 10.1016/j.jedc.2013.06.006

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