The elasticity of substitution between capital and labor and, in turn, the direction of technical change are critical parameters in many fields of economics. Until recently, though, the application of production functions with non-unitary substitution elasticities (i.e., non Cobb Douglas) was...

The reaction of hours worked to technology shocks represents a key controversy between RBC and New Keynesian explanations of the business cycle. It sparked a large empirical literature with contrasting results. We demonstrate that, with a more general and data coherent supply and production...

We examine the two-level nested Constant Elasticity of Substitution production function where both capital and labor are disaggregated in two classes. We propose a normalized system estimation method to retrieve estimates of the inter- and intra-class elasticities of substitution and factor...

Using euro-area data, we re-examine the empirical success of New Keynesian Phillips Curves (NKPCs). The nature of our re-evaluation relies on the actual empirical underpinnings of such estimates: we find existing estimates un-robust and - given that key parameters are generally calibrated rather...

Despite being critical parameters in many economic fields, the received wisdom, in theoretical and empirical literatures, states that joint identification of the elasticity of capital-labor substitution and technical bias is infeasible. This paper challenges that pessimistic interpretation....

We develop a framework for analyzing quot;medium-runquot; departures from balanced growth, and apply it to the economies of continental Europe. A time-varying factor-augmenting production function (mimicking quot;directedquot; technical change) with a below-unitary substitution elasticity...

For the US the supply and wages of skilled labor relative to those of unskilled labor have grown over the postwar period. The literature has tended to explain this through “skill-biased technical change”. Empirical work has concentrated around two variants: (1) Capital-skill complementarity,...

Capital-labor substitution and total factor productivity (TFP) estimates are essential features of growth and income distribution models. In the context of a Monte Carlo exercise embodying balanced and near balanced growth, we demonstrate that the estimation of the substitution elasticity can be...

In this paper, we seek to re-establish the link between the constant elasticity of substitution (CES) production function and neoclassical Solow growth theory. We do so in three dimensions. First, we review the increasing importance of the CES technology in modern dynamic macroeconomics, in...