The shape of aggregate production functions: evidence from estimates of the World Technology Frontier

Jakub Growiec, Anna Pajor, Dorota Pelle and Artur Prędki
Additional contact information
Dorota Pelle: Warsaw School of Economics, https://sgh.waw.pl
Artur Prędki: Cracow University of Economics

No 102, NBP Working Papers from Narodowy Bank Polski

Abstract: The article provides multifaceted evidence on the shape of the aggregate country-level production function, derived from the World Technology Frontier, estimated on the basis of annual data on inputs and output in 19 highly developed OECD countries in the period 1970–2004. A comparison of its estimates based on Data Envelopment Analysis and Bayesian Stochastic Frontier Analysis uncovers a number of significant discrepancies between the nonparametric estimates of the frontier and the Cobb–Douglas and translog production functions in terms of implied efficiency levels, partial elasticities, and returns-to-scale properties. Furthermore, the two latter characteristics as well as elasticities of substitution are found to differ markedly across countries and time, providing strong evidence against the constant-returns-to-scale (CRS) Cobb–Douglas specification, frequently used in related literature. We also find notable departures from perfect substitutability between unskilled and skilled labor, consistent with the hypotheses of skill-biased technical change and capital–skill complementarity. In the Appendix, as a corollary from our results, we have also conducted a series of development accounting and growth accounting exercises.

Keywords: world technology frontier; aggregate production function; Data Envelopment Analysis; Stochastic Frontier Analysis; partial elasticity; returns to scale; substitutability (search for similar items in EconPapers)
JEL-codes: E23 O11 O14 O33 O47 (search for similar items in EconPapers)
Pages: 61
Date: 2011
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The shape of aggregate production functions: evidence from estimates of the World Technology Frontier (2015)
Working Paper: The Shape of Aggregate Production Functions: Evidence from Estimates of the World Technology Frontier (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:102

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