The Shape of Production Function and the Direction of Technical Change

No 10457, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper views the standard production function in macroeconomics as a reduced form and derives its properties from microfoundations. The shape of this production function is governed by the distribution of ideas. If that distribution is Pareto, then two results obtain: the global production function is Cobb-Douglas, and technical change in the long run is labor-augmenting. Kortum (1997) showed that Pareto distributions are necessary if search-based idea models are to exhibit steady-state growth. Here we show that this same assumption delivers the additional results about the shape of the production function and the direction of technical change.

JEL-codes: E10 O40 (search for similar items in EconPapers)
Date: 2004-05
New Economics Papers: this item is included in nep-dev, nep-eff and nep-ino
Note: EFG PR
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Citations: View citations in EconPapers (9)

Published as Jones, Charles I. "The Shape Of Production Functions And The Direction Of Technical Change," Quarterly Journal of Economics, 2005, v120(2,May), 517-549.

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