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Disentangling the directions of technical change: a new growth accounting method (with M. Senouci)
Current growth theories do not allow for the study of the bias of technical change and the evolution of factor shares —- at aggregate nor sectoral level — without strong assumptions on the elasticity of substitution between capital and labour. We present a growth accounting framework that disentangles the different factor-saving directions of technical change and factor substitution. We build the framework for two primary factors, capital and labour. We represent technical change as the shift of a Leontief production function to a new function which is the convex hull of two shifts of this Leontief production function: one purely labour-saving, the other purely capital-saving. We apply this framework to industry-level data to answer the following questions: What has been the bias of technical change? Does an increase in the price of one factor spurs specific factor-saving innovation? Can we forecast the evolution of factor shares? We find that most industries are capital-biased but with a growing trend of labour-saving technical change. In some industries, we find significant evidence of labour-saving technical change induced by the cost of labour. The framework is validated by better forecasting the evolution of the factors shares than CES, Cobb-Douglas and Leontief functions.
Date:
23 February 2023, 14:00
Venue:
Manor Road Building, Manor Road OX1 3UQ
Venue Details:
Seminar Room G & online via Zoom
Speaker:
Emilien Ravigné (INET Oxford)
Organising department:
Institute for New Economic Thinking
Organiser:
Susan Mousley (INET Oxford Admin Team)
Organiser contact email address:
events@inet.ox.ac.uk
Part of:
INET Oxford Researcher Seminars
Booking required?:
Required
Booking url:
https://us02web.zoom.us/meeting/register/tZUudumvrjsuEtP9stH2NO85lmnG2bI217zt
Audience:
Public
Editor:
Susan Mousley
