We empirically show that the short-run elasticity of substitution between capital and labor ($\sigma_t$) is countercyclical. In recessions, capital and labor are more substitutable than in expansions. We explore the effects of the countercyclicality of $\sigma_t$ on aggregate fluctuations in the...

We incorporate a variable elasticity of substitution production function into an overlapping generations model à la Diamond (1965). We show that a certain parameter in the production function is a source of biased technical change is a crucial determinant of the economy's growth dynamics. For...

We develop an overlapping generations model to explore how the degree of aggregate substitutability between public and parental education expenditures impacts long run macroeconomic outcomes. Using a variable elasticity of substitution “education production function,” in which public and...

Sectoral heterogeneity is crucial to address several economic questions. This paper provides a detailed mapping of sectoral production possibility frontiers, using different nesting structures and levels of aggregation (primary, secondary, tertiary activities and energy-intensive firms)....

Description innovation is universally recognized as an important source of economic growth. Patents may be considered as a potential measure of innovation. As such, patents may alter isoquant maps, and measuring their elasticities is both intuitively and empirically appealing. This book...

We show that the large elasticity of substitution between capital and labor estimated in the literature on average, 0.9, can be explained by three factors: publication bias, use of aggregated data, and omission of the first-order condition for capital. The mean elasticity conditional on the...