Aggregate Output, Capital, and Labor in the Post-War U.S.

Posted: 25 Feb 2005

See all articles by Daniel Levy

Daniel Levy

Bar-Ilan University - Department of Economics; Emory University - Department of Economics; Rimini Center for Economic Analysis

Abstract

New estimates of an aggregate long-term production function for the post-war U.S. economy are reported. The results indicate that this long-term aggregate production function exhibits a slight, but statistically significant, increasing returns to scale. Since virtually all econometric growth studies assume constant returns to scale, my finding raises serious doubts about the validity of this common practice. I also find that since the war real output has become more sensitive to changes in capital and less sensitive to changes in labor. In particular, I show that the long-run capital and labor elasticities of real output are both in the range of 0.44-0.55. Similar estimates for the capital and labor elasticities of output from earlier studies covering pre-war and the inter-war periods are 0.25 and 0.75, respectively.

Keywords: Aggregate production function, increasing returns to scale, output sensitivity to changes in capital and labor, capital and labor elasticities

JEL Classification: E23

Suggested Citation

Levy, Daniel, Aggregate Output, Capital, and Labor in the Post-War U.S.. Economics Letters, Vol. 33, No. 1, pp. 41-45, May 1990, Available at SSRN: https://ssrn.com/abstract=671922

Daniel Levy (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 5290002
Israel
+972 3 531-8345 (Phone)
+972 3 738-4034 (Fax)

HOME PAGE: http://econ.biu.ac.il/en/levy

Emory University - Department of Economics ( email )

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Atlanta, GA 30322-0001
United States

HOME PAGE: http://economics.emory.edu/home/people/faculty/Levydaniel.html

Rimini Center for Economic Analysis ( email )

Wilfrid Laurier University
75 University Ave W.
Waterloo, Ontario N2L3C5
Canada

HOME PAGE: http://rcea.org/

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