Micro Data and Macro Technology
By Ezra Oberfield, Devesh Raval. Econometrica, 2012
291 citations recorded by the source corpus.
We develop a framework to estimate the aggregate capital‐labor elasticity of substitution by aggregating the actions of individual plants. The aggregate elasticity reflects substitution within plants and reallocation across plants; the extent of heterogeneity in capital intensities determines their relative importance. We use micro data on the cross‐section of plants to build up to the aggregate elasticity at a point in time. Interpreting our econometric estimates through the lens of several different models, we find that the aggregate elasticity for the U.S. manufacturing sector is in the range of 0.5–0.7, and has declined slightly since 1970. We use our estimates to measure the bias of technical change and assess the decline in labor's share of income in the U.S. manufacturing sector. Mechanisms that rely on changes in the relative supply of factors, such as an acceleration of capital accumulation, cannot account for the decline.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/b3a9ccae7b4800acf074616f0b69566cfff9969b
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Citations in the corpus
- The cross-section of labor leverage and equity returns (2016, unknown): “See Oberfield and Raval (2014) for a recent study about the US manufacturing sector that finds an average elasticity of .5.”
- Networks, Barriers, and Trade (2019, unknown): “3In Appendix H, we discuss how to endogeneize factor supply by using a model à la Roy (1951) and discuss the connection of our results with those in Galle et al.”
- Testing the Production Approach to Markup Estimation (2020, unknown): “…the weighted variance of capital shares of capital and labor of 0.1, and the aggregate materials share of total cost of 0.55 (all from Oberfield and Raval (2014)) the 90-10 ratio of marginal cost across plants to 2.7 (from Syverson (2004)), and the coefficient of a regression of the capital cost…”
- Tasks, Automation, and the Rise in US Wage Inequality (2021, background): “2, which is consistent with the range of elasticity of substitution estimates in (Karabarbounis and Neiman, 2013; Oberfield and Raval, 2020).”