òòò½Íø Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
The Elasticity of Aggregate Output with Respect to Capital and Labor
òòò½Íø Journal: Macroeconomics
(pp. 470–504)
Abstract
It is often assumed that the elasticity of GDP with respect to capital is one-third, but this assumes zero markups and an aggregate production function. I estimate the elasticity allowing markups to vary by industry and with a rich input-output structure. Assumptions about capital costs provide bounds on elasticity. In the United States from 1948–1995, the capital elasticity ranged from 0.19–0.32 and shifted to 0.24–0.37 by 1996–2018. Excluding housing or decapitalizing intellectual property lowers bounds to as low as 0.11–0.26. Based on these elasticities, common estimates of total factor productivity growth represent a lower bound.Citation
Vollrath, Dietrich. 2024. "The Elasticity of Aggregate Output with Respect to Capital and Labor." òòò½Íø Journal: Macroeconomics 16 (4): 470–504. DOI: 10.1257/mac.20220215Additional Materials
JEL Classification
- E13 General Aggregative Models: Neoclassical
- E22 Investment; Capital; Intangible Capital; Capacity
- E23 Macroeconomics: Production
- E25 Aggregate Factor Income Distribution
- N12 Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: U.S.; Canada: 1913-