Simultaneity represents a fundamental problem when estimating the elasticity of substitution between capital and labour. To overcome this problem, a wide variety of external instruments has been applied in the literature. However, the use of instruments may lead to wrong inference if they are...

The degree of substitutability between clean and dirty energy plays a central role in leading economic analyses of optimal environmental policy. Despite the importance, a constant and exogenous elasticity of substitution has been a dominant theoretical approach. We challenge this assumption by...

The paper quantitatively assesses the importance of supply-side drivers in the transition of the Japanese economy from low-skilled to high-skilled sectors and its implication for growth, labor demand and labor income shares. A sectoral supply-side system, estimated over the 1980-2012 period,...

We revisit the capital-skill complementarity hypothesis and examine whether and under what conditions this mechanism can explain the developments in wage inequality and labor share in the 1963–2016 period. Krusell, Ohanian, Ríos-Rull, and Violante (2000) show that a model with capital-skill...

We describe how a single technological innovation, the introduction of image processing of checks, led to distinctly different changes in the structure of jobs in two departments of a large bank overseen by one group of managers. In the downstairs deposit processing department, image processing...

This paper represents one of the first attempts at building a direct measure of occupational exposure to robotic labour-saving technologies. After identifying robotic and LS robotic patents retrieved by Montobbio et al. (2022), the underlying 4-digit CPC definitions are employed in order to...

This paper represents one of the first attempts at building a direct measure of occupational exposure to robotic labour-saving technologies. After identifying robotic and LS robotic patents retrieved by Montobbio et al. (2022), the underlying 4-digit CPC definitions are employed in order to...

This paper represents one of the first attempts at building a direct measure of occupational exposure to robotic labour-saving technologies. After identifying robotic and labour-saving robotic patents retrieved by Montobbio et al., (2022), the underlying 4-digit CPC definitions are employed in...

The influence of Schumpeter's notion of "creative destruction" may have led to an overemphasis on substitution between technologies in recent models of endogenous innovation. Historical examples of technological change suggest that new technologies may just as frequently complement older...

When analyzing potential ways to counter climate change, standard models of green growth abstract from investment in substitutability between “clean” and “dirty” energy inputs. Instead, they rely on the assumption that efficiency with respect to fossil fuels can be increased perpetually....

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...

A key parameter in the analysis of wage inequality is the elasticity of substitution between skilled and unskilled labor. We question the common view that the elasticity exceeds 1. Two biases, publication and attenuation, conspire to pull the mean elasticity reported in the literature to 1.9....

When analyzing potential ways to counter climate change, standard models of green growth abstract from investment in substitutability between "clean" and "dirty" energy inputs. Instead, they rely on the assumption that efficiency with respect to fossil fuels can be increased perpetually....

The elasticity of substitution between clean and dirty energy and the direction of technological change are central parameters in discussing one of the most challenging questions today, climate change. Despite their importance, there are few studies that empirically estimate these key...

Purpose: To specify a Variable Elasticity of Substitution function (VES), in which the estimated Elasticity of Substitution (ES) can give some implications for the tendency of economic growth in the Vietnames manufacturing sector.Design/Methodology/Approach: The contribution and the relevant...

We show that the large elasticity of substitution between capital and labor estimated in the literature on average, 0.9, can be explained by three factors: publication bias, use of aggregated data, and omission of the first-order condition for capital. The mean elasticity conditional on the...

We show that the large elasticity of substitution between capital and labor estimated in the literature on average, 0.9, can be explained by three factors: publication bias, use of aggregated data, and omission of the first-order condition for capital. The mean elasticity conditional on the...

Most macroeconomic models assume that aggregate output is generated by a specification for the production function with total physical capital as a key input. Implicitly this assumes that private and public capital stocks are perfect substitutes. In this paper we test this assumption by...

Can the existence of positive productivity spillovers between co-workers be explained by the presence of complementarities in a firm's production function? A simple model demonstrates that this is possible when workers perform their tasks sequentially and part of individuals' pay is determined...

The role of capital accumulation as a driver of the labor income share requires capital and labor to be substitutes, which appears paradoxical in a world predominantly characterized by complementarity between capital and labor. This paper argues that the composition of skills in the labor force...

The accumulation principle suggests that complementarity between capital and labor forces the labor income share to rise in the presence of capital accumulation. The CES model estimates using data from 20 Japanese industries between 1970 and 2012 explain the same outcome but with substitutable...

Various forms of substitutability are essential for establishing the existence of equilibria and other useful properties in diverse settings such as matching, auctions, and exchange economies with indivisible goods. We extend earlier models' definitions of substitutability to settings in which...

The role of capital accumulation as a driver of the labor income share requires capital and labor to be substitutes, which appears paradoxical in a world predominantly characterized by complementarity between capital and labor. This paper argues that the composition of skills in the labor force...

Vietnam’s economy is one of the most energy-intensive economies in the world, facilitated by long-standing government policies indirectly subsidizing energy prices through various state-owned enterprises in the energy sector. A consequence of this is that firms are using too much energy in...

We show that the large elasticity of substitution between capital and labor estimated in the literature on average, 0.9, can be explained by three factors: publication bias, use of aggregated data, and omission of the first-order condition for capital. The mean elasticity conditional on the...

The accumulation principle suggests that complementarity between capital and labor forces the labor income share to rise in the presence of capital accumulation. The CES model estimates using data from 20 Japanese industries between 1970 and 2012 explain the same outcome but with substitutable...

This paper examines the effect of product substitutability on the equilibrium profits in a distribution channel, where two symmetric manufacturers sell substitutable products to consumers through a non-exclusive retailer. Conventional wisdom suggests that the retailer will be better off while...

The decline in the U.S. labor share is far from uniform across firms. While the aggregate labor share has declined, especially in manufacturing, retail, and wholesale, the labor share of a typical firm in these industries has risen. This paper studies the dynamics of the substitution of capital...