NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Shape of Production Function and the Direction of Technical Change

Charles I. Jones

NBER Working Paper No. 10457
Issued in May 2004
NBER Program(s):   EFG   PR

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.

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Document Object Identifier (DOI): 10.3386/w10457

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

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