Factor-Augmenting Technical Change: An Empirical Assessment

33 Pages Posted: 29 Nov 2009

See all articles by Carlo Carraro

Carlo Carraro

Ca' Foscari University of Venice; CMCC - Euro Mediterranean Centre for Climate Change (Climate Policy Division); IPCC; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Centre for European Policy Studies, Brussels; Green Growth Knowledge Platform

Enrica De Cian

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

Date Written: November 25, 2009

Abstract

This paper estimates factor-specific technical change and input substitution using a structural approach. It improves upon the existing literature by introducing technology drivers for factor productivities and by assessing the impact of endogenous technical change on the estimates of substitution elasticities. The empirical results suggest that factor-productivities are indeed endogenous. In addition, technology drivers are factor-specific. Whereas R&D investments and machinery imports are important determinants of energy and capital productivity, education is found to be statistically related to labour productivity. The rate of energy-augmenting technical change is larger than that of either labour or capital. By contrast, the productivity of these two factors grows at similar rates. Estimates of the elasticities of substitution are within the ranges identified by previous literature. In addition, our results suggest that endogenous technical change lowers the estimated values of the substitution elasticity.

Keywords: Technical change, Technology spillovers, Endogenous growth, Panel regression

JEL Classification: C3, O47, Q55, Q56

Suggested Citation

Carraro, Carlo and De Cian, Enrica, Factor-Augmenting Technical Change: An Empirical Assessment (November 25, 2009). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 29_09, Available at SSRN: https://ssrn.com/abstract=1513295 or http://dx.doi.org/10.2139/ssrn.1513295

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Enrica De Cian

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