Share This Article:

A Note on Factor Prices and Technical Progress

Abstract Full-Text HTML Download Download as PDF (Size:225KB) PP. 202-210
DOI: 10.4236/ti.2011.23021    4,314 Downloads   7,159 Views   Citations

ABSTRACT

Changes in the factor prices have important impacts on characteristics of investments, such as the expected lifetime, the factor intensity and the factor productivity of new capital goods. Considering both changes in factor prices as well as technical progress, different effects arise at either high substitutability or low substitutability in production. It can be shown that for a production function close to the Cobb-Douglas case, higher interest rates and technical progress will decrease the expected lifetime, the capital intensity and productivity, while the reversed outcome occurs at lower substitutability between factor inputs.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

C. Melén, "A Note on Factor Prices and Technical Progress," Technology and Investment, Vol. 2 No. 3, 2011, pp. 202-210. doi: 10.4236/ti.2011.23021.

References

[1] L. Johansen, “Substitutions versus Fixed Production Coefficients in the Theory of Economic Growth: A Synthesis,” Econometrica, Vol. 27, No. 2, 1959, pp. 157-175. HHUUdoi:10.2307/1909440UU
[2] W. E. G. Salter, “Productivity and Technical Change,” Cambridge University Press, Cambridge, 1960.
[3] R. M. Solow, “Substitution and Fixed Proportion in the Theory of Capital,” The Review of Economic Studies, Vol. 29, No. 3, 1962, pp. 207-218. HHUUdoi:10.2307/2295955UU
[4] C. Bliss, “On Putty-Clay,” Review of Economic Studies, Vol. 35, No. 2, 1968, pp. 105-132. HHUUdoi:10.2307/2296542UU
[5] L. Johansen, “Production Functions,” North-Holland, Amsterdam, 1972.
[6] E. Lundberg, ”Produktivitet och R?ntabilitet,” SNS, Stockholm, 1961.
[7] K. J. Arrow, “The Economic Implications of Learning by Doing,” Review of Economic Studies, Vol. 29, No. 3, 1962, pp. 155-173. HHUUdoi:10.2307/2295952UU
[8] H. Uzawa, ”Optimum Technical Change in an Aggregate Model of Economic Growth,” International Economic Review, Vol. 6, No. 1, 1965, pp. 18-31. HHUUdoi:10.2307/2525621UU
[9] C. Burnside and M. Eichenbaum, “Factor-Hoarding and the Propagation of Business-Cycle Shocks,” The American Economic Review, Vol. 86, No. 5, 1996, pp. 1154-1174.
[10] J. M. Imbs, ”Technology, Growth and the Business Cycle,” Journal of Monetary Economics, Vol. 44, No. 1, 1999, pp. 65-80. HHUUdoi:10.1016/S0304-3932(99)00013-6UU
[11] B.-H. Bahk and M. Gort, “Decomposing Learning by Doing in Plants,” Journal of Political Economy, Vol. 101, No. 4, 1993, pp. 561-583. HHUUdoi:10.1086/261888UU
[12] R. Boucekkine, F. del Rio and B. Martinez, “Technological Progress, Obsolescence and Depreciation,” Oxford Economic Papers, Vol. 61, No. 3, 2006, pp. 440-466.
[13] C.-T. Hsieh, “Endogenous Growth and Obsolescence,” Journal of Development Economics, Vol. 66, No. 1, 2001, pp. 153-171. HHUUdoi:10.1016/S0304-3878(01)00159-6UU
[14] G. Bitros, “The Optimal Lifetime an Assets under Uncertainty in the Rate of Embodied Technical Change,” Metroeconomica, Vol. 59, No. 2, 2008, pp. 173-188. HHUUdoi:10.1111/j.1467-999X.2008.00298.xUU
[15] E. Bartelsman and M. Doms, “Understanding Productivity: Lessons from Longitudinal Microdata,” Journal of Economic Literature, Vol. 38, No. 3, 2000, pp. 569-595. HHUUdoi:10.1257/jel.38.3.569UU
[16] J. M. Abowd, F. Kramarz and D. N. Margolis, “High Wage Workers and High Wage Firms,” Econometrica, Vol. 67, No. 2, 1999, pp. 251-333. HHUUdoi:10.1111/1468-0262.00020UU
[17] J. Haltiwanger, J. Lane and J. Speltzer, “Productivity Differences across Employers: The Roles of Employer Size, Age, and Human Capital,” American Economic Review, Vol. 89, No. 2, 1999, pp. 94-98. HHUUdoi:10.1257/aer.89.2.94UU
[18] M. Baily, E. Bartelsman and J. Halltiwanger, “Labor Productivity: Structural Change and Cyclical Dynamics,” Review of Economics and Statistics, Vol. 83, No. 3, 2001, pp. 420-433. HHUUdoi:10.1162/00346530152480072UU
[19] K. Miyagiwa and C. Papageorgiou, “Elasticity of Substitution and Growth: Normalized CES in the Diamond Model,” Economic Theory, Vol. 21, No. 1, 2003, pp. 155-165. HHUUdoi:10.1007/s00199-002-0268-9UU
[20] A. Dupuy and A. de Grip, “Elasticity of Substitution and Productivity, Capital and Skill Intensity Differences across Firms,” Economics Letters, Vol. 90, No. 3, 2006, pp. 340-347. HHUUdoi:10.1016/j.econlet.2005.08.025UU
[21] O. de La Grandville, “In Quest of the Slutsky Diamond,” American Economic Review, Vol. 79, No. 3, 1989, pp. 468-481.
[22] R. Klump and O. de La Grandville, “Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions,” American Economic Review, Vol. 90, No. 1, 2000, pp. 282-291.

  
comments powered by Disqus

Copyright © 2019 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.