Labour-augmenting technical change data for alternative elasticities of substitution: growth, slowdown, and distribution dynamics

The main aim of this paper is to derive data for labour-augmenting technology (LAT) through growth accounting from a CES production function compatible with the stylized facts of growth. We solve a CES function for its LAT term and insert data. This provides LAT levels for alternative elasticities of substitution for 70 countries, 1950-2017. These LAT data then are analysed in relation to topics in the literature. Results are as follows. (i) The percentage growth rates of LAT are shown to fall over time (productivity slowdown) for all elasticity values in a panel data analysis with slope homogeneity. (ii) The standard growth result of a GDP growth rate equal to that of LAT and labour input holds only for LAT data based on low elasticities of substitution indicating that the economies are not in steady states. (iii) Matching the labour/capital share ratios from CES functions with those of PWT9.1 if the MPL-to-wage ratio is 1.6, the elasticities of substitution vary around 0.8. For this value, (iv) 13 of 69 countries have a productivity slowdown; (v) LAT growth rates are negatively related to their levels ten years ago without strongly changing the coefficient of variation or kernel density distribution over time.

Automated summary

The aim of this paper is to derive data for labour-augmenting technology (LAT) through growth accounting and analyze it in relation to topics in the literature. The results show that the growth rates of LAT decline over time, and LAT data based on low elasticities of substitution indicate that the economies are not in steady states.