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A semiparametric stochastic frontier model is proposed for panel data, incorporating several flexible features. First, a constant elasticity of substitution (CES) production frontier is considered without log-transformation to prevent induced non-negligible estimation bias. Second, the model flexibility is improved via semiparameterization, where the technology is an unknown function of a set of environment variables. The technology function accounts for latent heterogeneity across individual units, which can be freely correlated with inputs, environment variables, and/or inefficiency determinants. Furthermore, the technology function incorporates a single-index structure to circumvent the curse of dimensionality. Third, distributional assumptions are eschewed on both stochastic noise and inefficiency for model identification. Instead, only the conditional mean of the inefficiency is assumed, which depends on related determinants with a wide range of choice, via a positive parametric function. As a result, technical efficiency is constructed without relying on an assumed distribution on composite error. The model provides flexible structures on both the production frontier and inefficiency, thereby alleviating the risk of model misspecification in production and efficiency analysis. The estimator involves a series based nonlinear least squares estimation for the unknown parameters and a kernel based local estimation for the technology function. Promising finite-sample performance is demonstrated through simulations, and the model is applied to investigate productive efficiency among OECD countries from 1970–2019.

This paper aims to investigate whether empirical evidence for scale economies can be found across countries and if so, whether this evidence varies across the stage of development.

The paper uses statistical methods to make comparisons between countries.

The empirical results suggest overall evidence towards aggregate increasing returns across all samples. Within the Cobb‐Douglas framework, stronger evidence for aggregate increasing returns is found among samples depicting economies in the early stages of development. The CES framework in turn supports aggregate scale economies for advanced economies, while unitary elasticity of substitution cannot be rejected for less developed economies, giving further support for the Cobb‐Douglas estimates.

Given that evidence for scale economies is found within different estimation frameworks for different groups of economies, comparative judgment is prevented. The results nevertheless provide evidence on the overall relevance of scale economies within and across groups of economies, while also giving a clear indication of the relevance of stage of development in economic growth and development analysis.

The most fundamental insight of the empirical results presented in this paper is that there is no reason to assume that the determinants of growth or the parameters guiding economies' adjustments towards their steady states or growth paths will be similar for economies at different stages of development, given their significant structural differences, whether in terms of production structures and characteristics or consumption patterns.

The purpose of this paper is to explore the properties of the variable elasticity of substitution (VES) production function, and examine the dynamics of growth associated with it.

The VES production function is incorporated into an otherwise standard Diamond overlapping generations model.

Depending on parameter combinations, the economy can achieve a unique and stable steady state akin to that observed in the Solow-Swan model, reach a poverty trap or transition towards an upper bound of per capita capital stock. A special case of the VES production function is also consistent with unbounded growth.

The paper is theoretical in nature. Further empirical analysis could shed deeper insights into the results presented in this study.

The VES production function, when applied to the context of the Diamond model, can capture a variety of growth experiences observed in the empirical literature.

In the context of the Diamond model, a higher value of a particular parameter in the production function leads to greater intergenerational income and consumption inequality. Hence, the study provides a potential explanation for intergenerational inequalities observed in practice.

The study demonstrates the empirical value of the VES production function in explaining observed differences in factor shares, rewards and elasticities within and between countries over time.

Although the importance of the elasticity of substitution between capital and labour (σ) has been recognized in many areas in economics, this parameter has not received enough attention in economic growth. The purpose of this paper is to review the recent development in the importance of σ in economic growth.

This paper specifically reviews the possibility of perpetual growth and slowdown, and the asymptotic behaviour of the balanced growth path for different values of σ. It also reviews the determinants of the aggregate σ.

Based on the empirical evidence that the value of σ significantly departs from the Cobb‐Douglas value of unity, the paper recommends employing the constant elasticity of substitution (CES) production function in both theoretical and empirical growth research.

This paper offers a new perspective on the elasticity of substitution between capital and labour due to its evaluation of various factors, methods and approaches.

We examine the two-level nested constant elasticity of substitution production function where both capital and labor are disaggregated in two classes. We propose a normalized system estimation method to retrieve estimates of the inter- and intra-class elasticities of substitution and factor-augmenting technical progress coefficients. The system is estimated for US data for the 1963–2006 period. Our findings reveal that skilled and unskilled labor classes are gross substitutes, capital structures and equipment are gross complements, and aggregate capital and aggregate labor are gross complements with an elasticity of substitution close to 0.5. We discuss the implications of our findings and methodology for the analysis of the causes of the increase in the skill premium and, by implication, inequality in a growing economy.

This chapter is an up-to-date survey of the state-of-the art in consumer demand analysis. We review (and evaluate) advances in a number of related areas, in the spirit of the recent survey paper by Barnett and Serletis (2008). In doing so, we only deal with consumer choice in a static framework, ignoring a number of important issues, such as, the effects of demographic or other variables that affect demand, welfare comparisons across households (equivalence scales), and the many issues concerning aggregation across consumers.

The famous Uzawa (1961) balanced growth theorem has exercised a tyranny of sorts over macroeconomics for decades. It is the prime reason why researchers use Cobb–Douglas production functions and abstract from considering movements in factor shares. Others have had to recourse to complex explanations for long-run labor augmentation in technical progress. In this chapter, we discuss the issues arising from this problem and propose a way of achieving balanced growth with a short-run production function where the elasticity of factor substitution is less than one, and capital augmenting technology shocks can be permanent. We do so by allowing firms to choose the relative reliance on capital in the production technology and introducing a suitable modification of the production function. We also provide some model simulations in the context of a simple deterministic neoclassical growth model.

A growing polarization of society accompanied by an erosion of the middle class is receiving increasing attention in recent German economic and social policy discussion. Our study contributes to this discussion in two ways: First, on a theoretical level we propose extended multidimensional polarization indices based on a constant elasticity of substitution (CES)-type well-being function and present a new measure to multidimensional polarization, the mean minimum polarization gap, 2DGAP. This polarization intensity measure provides transparency with regard to each single attribute, which is important for targeted policies, while at the same time respecting their interdependent relations. Second, in an empirical application, time is incorporated, in addition to the traditional income measure, as a fundamental resource for any activity. In particular, genuine personal leisure time will account for social participation in the sense of social inclusion/exclusion and Amartya Sen’s capability approach.

Instead of arbitrarily choosing the attribute parameters in the CES well-being function, the interdependent relations of time and income are evaluated by the German population. With the German Socio-Economic Panel (GSOEP) and detailed time use diary data from the German Time Use Surveys (GTUSs) 1991/1992 and 2001/2002, we quantify available and extended multidimensional polarization measures as well as our new approach to measuring the polarization of the working poor and affluent in Germany.

There are three prominent empirical results: Genuine personal leisure time in addition to income is an important and significant polarization attribute. Compensation is of economic and statistical significance. The new minimum 2DGAP approach reveals that multidimensional polarization increased in the 1990s in Germany.

The purpose of this paper is to understand technology diffusion in the banking sector in India by analyzing ATM (automatic teller machine) technology and its replacement of the teller (labor). ATMs are fast emerging as an important IT investment for a bank in India. Hence, in this paper the authors use the ATM as a proxy for capital and the teller as a proxy for labor.

The debate on the “IT paradox” is the motivation for this paper. The constant elasticity of substitution (CES) model is used, as the degree of substitution can be estimated. The degree of substitutability of one form of input for another namely, ATM (capital) for teller (labor), is discussed by developing an appropriate model to understand the same.

The rapid diffusion of the ATM was clearly large from 1998, nine years after it was first adopted. This was also a time when the number of tellers was falling and the wage bill for tellers increasing. The CES production function model used in this paper is clearly a good predictor of the data compared with the other cases. The estimate shows that the degree of substitutability of the teller by the ATM is high. However, the ATM is not a perfect substitute. By running counterfactual experiments, it can be concluded that both a fall in the price of ATMs and an increase in the wage bill for tellers contributed to the diffusion of the ATM.

The excess labor in public sector banks needs to be redeployed rapidly, or staff need to be trained in other functions as do private banks, so that they do not become redundant as technology diffuses.

The paper is original in its data, its model building and testing in the banking sector.