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Multifactor CES elasticity and productivity growth: a cross-sectional approach

Kim Jiyoung, Nakano Satoshi and Nishimura Kazuhiko

No 632, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: Sector-wise productivity growth is measured, along with the sectoral elasticity of substitution, under the multifactor CES framework by regressing the growth of factor-wise cost shares against the growth of relative factor prices. We use linked input–output tables for Japan and Korea as the data sources for factor price and cost shares in two temporally distant states. We then construct a multisectoral general equilibrium model using the system of estimated CES unit cost functions and evaluate the economy-wide distribution of exogenous productivity gains in terms of welfare. Further, we examine the differences between models based on a priori elasticities such as the Leontief and the Cobb–Douglas systems.

Keywords: Productivity; Input-output tables; East Asia; Japan; South Korea; Productivity Growth; Multi-Factor CES; Elasticity of Substitution; General Equilibrium; Linked Input-Output Tables (search for similar items in EconPapers)
JEL-codes: D24 D57 D58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse and nep-eff
Date: 2017-03
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 632. 2017-03

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