A Note on the Empirical Estimation of the CES Production Function with the Use of Capital Data
Other calculations show that this conclusion is not particularly sensitive to the choice of bo. However, if the growth of capital per laborer were double or triple what we actually experienced, then, of course, the sensitivity of growth of output to the elasticity of substitution is significant. For example, the U.S.S.R. experienced approximately a 200 per cent increase in capital per man hour over the 1947-1960 period.7 Column 2 of table 1 shows that the effect of this large an increase in capital per man hour is much more sensitive to the elasticity of substitution. But even in this case, compared with the 140 per cent increase in output per man hour actually achieved in the Soviet Union over this period of time, the differences in the predictions of the effects of the growth of capital appear relatively small. The above analysis suggests that while the CES model may have significant advantages over the Cobb-Douglas model for analysis of growth of output in economies where the capital-labor ratio is changing rapidly, for analysis of growth of output in the United States it does not do much that the old Cobb-Douglas model didn't do. The road to improvement in our presently very unsatisfactory growth theory must lie in other directions. ublished data from Richard Moorsteen.
- DOI
- 10.2307/1927717
- Volume
- 47 (3)
- Pages
- 328
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