We generalize the normalized Constant Elasticity of Substitution (CES) production function by allowing the elasticity of substitution to vary isoelastically with (i) relative factor shares, (ii) marginal rates of substitution, (iii) capital-labor ratios, or (iv) capital-output ratios. Ensuing...

We derive the aggregate normalized CES production function from idea-based microfoundations where firms are allowed to choose their capital- and labor-augmenting technology optimally from a menu of available technologies. This menu is in turn augmented through factor-specific R&D. The considered...

This paper aims to fill the gap between theoretical and empirical studies of home market effects (HMEs). On one hand, empirical studies on the price aspect of HMEs -- that wages are higher in larger markets -- are supportive, but studies on the quantity aspect -- that the firm share in the...

Elasticity of factor substitution is one of the key parameters of any computational general equilibrium model. Despite a wide use of this model in a policy analysis, there are a few estimates of the elasticity, with almost none for transition economies in Europe. To fill this gap, we estimate...