On the elasticity of substitution between labor and ICT and IP capital and traditional capital

Vahagn Jerbashian

Review of Economic Dynamics, 2026, vol. 60

Abstract: I estimate a nested CES production function for a panel of European countries, distinguishing between information and communication technologies (ICT), intellectual property (IP) capital, and traditional capital. I allow for differences in the elasticities of substitution between labor, an aggregate of ICT and IP capital, and traditional capital. Results indicate that ICT and IP together are gross substitutes for labor, whereas traditional capital is a gross complement. Rapid technological progress and capital accumulation in ICT and IP capital largely explain the decline in labor income share. The imputed labor-aggregate capital elasticity of substitution is below 1 but increases over time. (Copyright: Elsevier)

Keywords: CES Production function; Elasticities of substitution; System of equations; ICT; IP Capital; Traditional capital (search for similar items in EconPapers)
JEL-codes: E22 E25 J23 O33 (search for similar items in EconPapers)
Date: 2026
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Related works:
Working Paper: On the Elasticity of Substitution between Labor and ICT and IP Capital and Traditional Capital (2024)
Working Paper: On the Elasticity of Substitution between Labor and ICT and IP Capital and Traditional Capital (2022)
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DOI: 10.1016/j.red.2026.101332

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