This note first develops a production function with two elasticities of substitution between two input factors. Second, the note gives an application regarding the unequal development of relative capital intensities and productivities across countries and tries to quantify it empirically.

Klein (2000) advocates the use of the Schur decomposition of a matrix pencil to solve linear rational expectations models. Meanwhile his algorithm has become a center piece in several computer codes that provide approximate solutions to (non-linear) dynamic stochastic general equilibrium models....