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A new class of production functions and an argument against purely labor-augmenting technical change

Jakub Growiec ()

No 2006056, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper follows Jones (2005) in his approach to deriving the global production function from microfoundations. His framework is generalized by allowing for dependence between the Pareto distributions of labor- and capital-augmenting developments. Using the Clayton copula family to capture this dependence, we derive a 'Clayton-Pareto' class of production functions that nests both the Cobb-Douglas and the CES. Embedding the resultant production function in a neoclassical growth framework, we draw conclusions for the long-run direction of technical change. Jones' result of Cobb-Douglas global production functions and purely laboraugmenting technical change hinges on the assumption of independence of marginal Pareto distributions. In our more general case, the shape of local production functions matters for the shape of the global production function, and technical change augments both factors in the long run. Furthermore, the elasticity of substitution between capital and labor may exceed unity and thus yield endogenous growth.

Keywords: global production function; technology frontier; CES; Pareto distribution; Clayton copula (search for similar items in EconPapers)
JEL-codes: E23 O30 O40 (search for similar items in EconPapers)
Date: 2006-06
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Journal Article: A new class of production functions and an argument against purely labor‐augmenting technical change (2008) Downloads
Working Paper: A New Class of Production Functions and an Argument Against Purely Labor-Augmenting Technical Change (2006) Downloads
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