Empirical studies show that the elasticity of substitution between capital and labor is larger than one in developed countries but smaller in developing countries. This paper develops a production function which allows for this structure in the elasticity of substitution. The case of a falling...

This note first develops a production function with two elasticities of substitution between two input factors. Second, the note gives an application regarding the unequal development of relative capital intensities and productivities across countries and tries to quantify it empirically.