The determinants of capital intensity in Japan and the U.S

Dario Judzik () and Hector Sala

Working Papers from Department of Applied Economics at Universitat Autonoma of Barcelona

Abstract: We estimate the determinants of capital intensity in Japan and the US, characterized by striking different paths. We augment an otherwise standard Constant Elasticity of Substitution (CES) model with demand-side considerations, which we find especially relevant in the US. In this augmented setting, the elasticity of substitution between capital and labor is placed around 0.85 in Japan, and 0.30 in the US. We also find evidence of biased technical change, which is capital-saving in Japan but labor-saving in the US. These differences help us explain the diverse experience in the capital deepening process of these economies, and lead us to conclude that demand-side drivers may also be relevant to account for different growth experiences. A close look at the nature of technological change is also needed before designing one-size-fits-all industrial, economic growth, and/or labor market policies.

Keywords: Capital intensity; Biased technological change; Elasticity of substitution; Capacity utilization rate; Employment (search for similar items in EconPapers)
JEL-codes: E22 E24 O33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2014-05
New Economics Papers: this item is included in nep-gro and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The determinants of capital intensity in Japan and the US (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:uab:wprdea:wpdea1404

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