The choice of CES production techniques and balanced growth

Arbeitspapier

We show that allowing firms a choice of CES production techniques (via the distribution parameter between capital and labor) can result in a new class of production functions that produces short-run capital-labor complementarity but yields a long-run unit elasticity of substitution. This is shown to occur if we provide a mathematical framework for this choice that maintains strict essentiality of the production process and satisfies the requirement of unit-invariance. The class of production functions derived are consistent with a balanced growth path even in the presence of capital-augmenting technical progress. The approach yields a simple yet powerful way of introducing CES-type production functions in macroeconomic models.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: School of Economics Discussion Papers ; No. 11,13

Classification and Topics

• Classification: Wirtschaft ; Aggregate Factor Income Distribution ; Technological Change: Choices and Consequences; Diffusion Processes ; Economic Growth and Aggregate Productivity: General
• Subject: balanced growth ; production technique ; biased technology ; elasticity of substitution

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): León-Ledesma, Miguel A. ; Satchi, Mathan
• Event: Veröffentlichung
• (who): University of Kent, School of Economics
• (where): Canterbury
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/50623
• Last update: 10.03.2025, 11:45 AM CET