Micro Data and Macro Technology

Ezra Oberfield and Devesh Raval

No 20452, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a framework to estimate the aggregate capital-labor elasticity of substitution by aggregating the actions of individual plants, and use it to assess the decline in labor's share of income in the US manufacturing sector. The aggregate elasticity reflects substitution within plants and reallocation across plants; the extent of heterogeneity in capital intensities determines their relative importance. We use micro data on the cross-section of plants to build up to the aggregate elasticity at a point in time. Our approach places no assumptions on the evolution of technology, so we can separately identify shifts in technology and changes in response to factor prices. We find that the aggregate elasticity for the US manufacturing sector has been stable since 1970 at about 0.7. Mechanisms that work solely through factor prices cannot account for the labor share's decline. Finally, the aggregate elasticity is substantially higher in less-developed countries.

JEL-codes: E10 E23 E25 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-his and nep-mac
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (204)

Published as Ezra Oberfield & Devesh Raval, 2021. "Micro Data and Macro Technology," Econometrica, Econometric Society, vol. 89(2), pages 703-732, March.

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Related works:
Working Paper: Micro Data and Macro Technology (2014)
Working Paper: Micro data and macro technology (2012)
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