2013 Fiscal Year Final Research Report
Aggregate Elasticity of Substitution and Growth and Distribution
| Project/Area Number |
23530223
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Multi-year Fund |
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| Section | 一般 |
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| Research Field |
Economic theory
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| Research Institution | University of Hyogo |
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Principal Investigator |
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| Project Period (FY) |
2011 – 2013
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| Keywords | aggregate substitution / two-level CES production / labor mobility / income distribution / neoclassical growth / non-homothetic utility / structural change |
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| Research Abstract |
In this research,we explored the endogenous mechanism of formulating aggregate elasticity of substitution between capital and labor that incorporate the behaviours of labor market and good market and analyzed its impacts on growth and income distribution.
Our main results are as follows. Large aggregate elasticity of substitution can enhance growth but decrease labor share. In this context, labor mobility across sectors can enlarge the elasticity of substitution. However, when savings mainly stem from skilled wage income, the instability is more likely to occur with the empirically relevant capital-skill complementarity, and even with the larger endogenous aggregate elasticity of substitution. As to the two sector model, we show that larger heterogeneity of income effects in each sector, the larger capital contents in the manufacturing sector, and the larger skilled labor contents in the service sector, are possible causes of increased aggregate elasticity of substitution.
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