Journal of Labor Economics Vol. 3 No. 4 1985
The Elasticity of Substitution Revisited: The Effects of Secular Changes in Labor Force Structure
Abstract
Because the relative quantities and prices of blue- and white-collar labor have changed dramatically over time, aggregation into a single factor of production distorts estimates of the substitutability between capital and labor. This distortion is a function of growth rates of human and nonhuman capital and the rate of shift of the labor force from blue- to white-collar occupations. Conventional methods of adjusting for labor quality may actually increase the problem. Previous estimates of unity or less for the elasticity of substitution between capital and aggregate labor are shown to be consistent with a production function with a constant elasticity of substitution of about 2.5.
- DOI
- 10.1086/298066
- Volume
- 3
- Issue
- 4
- Pages
- 490-507
- Language
- en
- Sources
- openalex crossref