Factor-Augmenting Technical Change: An Empirical Assessment

35 Pages Posted: 4 May 2009

See all articles by Enrica De Cian

Enrica De Cian

Fondazione Eni Enrico Mattei (FEEM); CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici

Date Written: April 30, 2009

Abstract

Starting from a system of factor demands, an empirical model that allows estimating factor-augmenting technical change is derived. Factor-augmenting technical change is defined as the improvement in factor productivities that can occur either exogenously or endogenously, with changes in other macroeconomic variables. This paper provides additional estimates for the substitution possibilities among inputs and it offers new empirical evidence on the direction and sources of factor-augmenting technical change, an issue that has not yet been explored by the empirical literature on growth determinants. The empirical findings suggest that technical change is directed. Technical change tends to be more energy-saving than capital- and labour-saving. Both R&D investments and international trade are important determinants of growth in energy and capital productivity whereas technical change for labour is positively related to education expenditure. Therefore, the sources of factor-augmenting technical change go beyond R&D investments, as proposed in the theory of directed technical change, and they differ across inputs. In other words, not only is technical change directed, the sources of factor-augmenting technical change appear to be input specific.

Keywords: Factor-Augmenting Technical Change, Technology Spillovers, Panel Data

JEL Classification: C3, O47, Q55, Q56

Suggested Citation

De Cian, Enrica, Factor-Augmenting Technical Change: An Empirical Assessment (April 30, 2009). FEEM Working Paper No. 18.2009. Available at SSRN: https://ssrn.com/abstract=1397171 or http://dx.doi.org/10.2139/ssrn.1397171

Enrica De Cian (Contact Author)

Fondazione Eni Enrico Mattei (FEEM) ( email )

Campo S. M. Formosa, Castello 5252
Venice, 30122
Italy

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici ( email )

via Augusto Imperatore, 16
Lecce, I-73100
Italy

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