Replication data for: The Substitution Elasticity, Factor Shares, and the Low-Frequency Panel Model

Principal Investigator(s): View help for Principal Investigator(s) Debdulal Mallick; Robert S. Chirinko

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Data-and-Program-Code			08/03/2019 05:33:AM
LICENSE.txt	text/plain	14.6 KB	08/03/2019 01:33:AM

Project Citation:

Project Description

Summary: The value of the elasticity of substitution between labor and capital (σ) is a crucial assumption in understanding the secular decline in the labor share of income. This paper develops and implements a new strategy for estimating this crucial parameter by combining a low-pass filter with panel data to identify the low-frequency/long-run relations appropriate to production function estimation. Standard estimation methods, which do not filter out transitory variation, generate downwardly biased estimates of 40 percent to 70 percent relative to the benchmark value. Despite correcting for this bias, our preferred estimate of 0.40 is substantially below the Cobb-Douglas assumption of σ = 1.

Scope of Project

JEL Classification:
      E25 Aggregate Factor Income Distribution
      C51 Model Construction and Estimation
      E24 Employment • Unemployment • Wages • Intergenerational Income Distribution • Aggregate Human Capital • Aggregate Labor Productivity
      O41 One, Two, and Multisector Growth Models
      E22 Investment • Capital • Intangible Capital • Capacity

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Published Versions

V1 [2019-08-03]

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