The relationship between a declining labor income share and a falling relative price of capital requires capital and labor to be gross substitutes at the aggregate level (i.e., σ-Agg1). We argue that this restriction can be relaxed if we distinguish labor by skills and identify differential...

This paper provides the first quasi-experimental estimate of the micro capital-labor elasticity of substitution. We use a discontinuity in the average payroll tax rate to show that firms decrease both labor and capital when experiencing higher payroll tax rates. We argue that this is consistent...

The decline in the labor share has attracted the attention of economists in recent years. Empirical literature has documented that this decline can be explained by the increasing capital intensity of the U.S. economy. This paper proposes a mechanism that accounts for the increasing capital...

We explore the impact of reciprocal, specific or ad valorem, import tariffs on welfare among N symmetric countries (a free-trade agreement)—using the standard Krugman’s one-sector trade model, with unspecified variable-elasticity preferences (mostly under decreasing elasticity of utility)....

The constant elasticity of substitution (CES) function is an important function that is widely used in both theoretical analysis and applied economics. We propose a systematic framework to estimate the deep nested CES function using the nonlinear least squares (NLS) method. This method fills the...