Rainer Klump

Using a normalized CES function with factor-augmenting technical progress, we estimate a supply-side system of the US economy from 1953 to 1998. Avoiding potential biases that have occurred in earlier estimations and putting a high emphasis on the consistency of the data set, required by the estimated system, we obtain robust results not only for the aggregate elasticity of substitution but also for the parameters of labor and capital augmenting technical change. We find that the elasticity of substitution is significantly below unity and that the growth rates of technical progress show an interesting asymmetrical pattern where the growth of labor-augmenting technical progress is exponential, while the growth of capital augmenting progress is hyperbolic or logarithmic. JEL: C22, E23, E25, 030, 051.