Evidence of induced innovation in US sectoral Capital´s shares
Andrew Young (),
Hernando Zuleta () and
Andres Garcia-Suaza ()
Documentos de Trabajo from Universidad del Rosario
We use annual data on capital´s share and relative factor prices from 35 US industriesfrom 1960 to 2005 to test the induced innovation hypothesis. We derive, from a productionfunction framework, testable implications for the effect of contemporaneous and lagged factorprice ratios on capital´s share of production. The predicted effect is positive or negativedepending on the elasticity of substitution between labor and capital. From panel regressions, theestimated effect of the contemporaneous factor price ratio implies an elasticity of substitutionthat is less than unity, consistent with the consensus from the literature. Based on this, ournegative estimated effects for lagged price ratios are both statistically significant and consistentwith the induced innovation hypothesis.
Keywords: induced innovation; biased technical change; capital´s share; labor´s share; elasticityof substitution (search for similar items in EconPapers)
JEL-codes: O31 O47 E25 E23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-ino
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Working Paper: Evidence of Induced Innovation in US Sectoral Capital’s Shares (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:006740
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