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CONSTANT-ELASTICITY-OF-SUBSTITUTION PRODUCTION FUNCTION

Published online by Cambridge University Press:  01 November 2008

Hideki Nakamura  and
Masakatsu Nakamura
Hideki Nakamura*
Affiliation:
Osaka City University
Masakatsu Nakamura
Affiliation:
Fukushima University
*
Address correspondence to: Hideki Nakamura, Faculty of Economics, Osaka City University, 3-3-138 Sugimoto, Sumiyoshi, Osaka, 558-8585, Japan; e-mail: hnakamur@econ.osaka-cu.ac.jp.
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Abstract

We consider endogenous changes of inputs from labor to capital in the production of intermediate goods, i.e., a form of mechanization. We derive complementary relationships between capital accumulation and mechanization by assuming a Cobb–Douglas production function for the production of final goods from intermediate goods. A constant-elasticity-of-substitution production function in which the elasticity of substitution exceeds unity can be endogenously derived as the envelope of Cobb–Douglas production functions when the efficiency of inputs is assumed in a specific form. The difficulty of mechanization represents the elasticity of substitution.

Keywords

MechanizationMicro Foundation for a CES Production Function

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Type
Notes
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Macroeconomic Dynamics , Volume 12 , Issue 5 , November 2008 , pp. 694 - 701
Copyright
Copyright © Cambridge University Press 2008

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