Arbeitspapier
Declining labour share: Evidence of a change in the underlying production technology
The study demonstrates that the decline in the labour share in Finland can not be explained by the Cobb-Douglas production function.Instead, we propose an approach based on the constant-elasticity-of-substitution (CES) production function with labour- and capital-augmenting technical progress.The model is augmented by imperfect competition in the output market.According to the empirical results based on estimation of the first-order-conditions, the technical elasticity of substitution is significantly less than unity (0.6) and hence the Cobb-Douglas production function is rejected.The growth rate of the estimated labour-augmenting technical progress has decreased in recent years, which is not consistent with the 'new-economy' hypothesis. Capital-augmenting technical trend has exploded during the same period, which provides a possible explanation for the rapid growth of the Solow residual.The main contributing factor behind the declining labour share is, however, the increasing mark-up.
- ISBN
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951-686-721-9
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Finland Discussion Papers ; No. 10/2001
- Classification
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Wirtschaft
- Subject
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production function
elasticity of technical substitution
input-augmenting technical progress
new economy
- Event
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Geistige Schöpfung
- (who)
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Ripatti, Antti
Vilmunen, Jouko
- Event
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Veröffentlichung
- (who)
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Bank of Finland
- (where)
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Helsinki
- (when)
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2001
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Ripatti, Antti
- Vilmunen, Jouko
- Bank of Finland
Time of origin
- 2001
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