An Estimation of Industry-Level Capital-Labor Substitution Elasticities for U.S. Production: An Argument for Cobb-Douglas

USITC Economics Working Paper No. 2001-11-C

26 Pages Posted: 8 Dec 2001

See all articles by Edward J. Balistreri

Edward J. Balistreri

Iowa State University

Christine A. McDaniel

George Mason University - Mercatus Center

Eina V. Wong

University of Colorado at Boulder - Department of Economics

Date Written: January 2002

Abstract

A key parameter that determines the distributional impacts of a policy shift in general equilibrium simulations is the elasticity of substitution between capital and labor. Using a rich new data set by the Bureau of Economic Analysis, we estimate substitution elasticities for 28 industries and provide an indication of the long- and short-run estimates. Given the structure of most growth models, we posit that the relationship between capital and labor is likely to be close to Cobb-Douglas. Our findings lend support to the Cobb-Douglas specification as a transparent starting point in simulation analysis.

Keywords: Production substitution elasticities, computable general equilibrium modeling

JEL Classification: C20, C22, C68

Suggested Citation

Balistreri, Edward J. and McDaniel, Christine A. and Wong, Eina V., An Estimation of Industry-Level Capital-Labor Substitution Elasticities for U.S. Production: An Argument for Cobb-Douglas (January 2002). USITC Economics Working Paper No. 2001-11-C, Available at SSRN: https://ssrn.com/abstract=292604 or http://dx.doi.org/10.2139/ssrn.292604

Edward J. Balistreri

Iowa State University ( email )

260 Heady Hall
Ames, IA 50011
United States
3032531674 (Phone)

Christine A. McDaniel (Contact Author)

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States
703-993-9228 (Phone)

Eina V. Wong

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309-0256
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
299
Abstract Views
1,598
rank
113,875
PlumX Metrics