Rainer Klump

Factor Substitution and Factor-Augmenting Technical Progress in the United States: A Normalized Supply-Side System Approach

Using a normalized CES function with factor-augmenting technical progress, we estimate a supply-side system of the U.S. economy from 1953 to 1998. Avoiding potential estimation biases that may have occurred in earlier studies and putting a high emphasis on data consistency, 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 technical progress shows an asymmetrical pattern where the growth of labor-augmenting technical progress is exponential, while that of capital is hyperbolic or logarithmic.

CES Production Functions and Economic Growth

We examine inconsistencies and controversies related to the use of CES production functions in growth models. First, we show that not all variants of CES functions commonly used are consistently specified. Second, using a simple growth model, we find that a higher elasticity of substitution leads to a higher steady state and makes the emergence of permanent growth more probable. It is also pointed out that the effect of a higher elasticity of substitution on the speed of convergence depends on the relative scarcity of the factors of production. Finally, we discuss possible explanations of variations in the elasticity of substitution. Copyright 2000 by The editors of the Scandinavian Journal of Economics.

Factor Substitution, Income Distribution, and Growth in a Generalized Neoclassical Model

Abstract We analyze a generalized neoclassical growth model that combines a normalized CES production function and possible asymmetries of savings out of factor incomes. This generalized model helps to shed new light on a recent debate concerning the impact of factor substitution and income distribution on economic growth. We show that this impact relies on both an efficiency and a distribution effect, where the latter is caused by the distributional consequences of an increase in the elasticity of substitution. While the efficiency effect is always positive, the sign of the distribution effect depends on the particular savings hypothesis. If the savings rate out of capital income is substantial so that a certain threshold value is surpassed, the efficiency effect dominates and higher factor substitution accelerates the accumulation of capital and works as a major engine of growth.

Trade, money and employment in intertemporal optimizing models of growth

This paper unites elements of Sidrauskis (1967) monetary model of growth, Venturas (1997) analysis of the effects of international trade on growth, and some work on the labour market implications of growth by Barro and Sala-i-Martin (1995). It was shown by Ventura that, for a small economy, free international trade leads to an increase of the de facto elasticity of substitution between the domestic factors of production. The first part of the paper analyses how such an increase in the elasticity of substitution influences the steady state and the speed of convergence. From the Sidrauski model we know that money is super-neutral in the long-run but that monetary policy can have real effects along the transition path as long as the intertemporal elasticity of substitution is not equal to one. In the second part of this paper, it is shown how these results also depend on the elasticity of substitution between factors of production. The results give some important insights into possible interactions between monetary and trade policy in the long and short run. The last part of the paper deals with a modified version of the monetary growth model, which includes endogenous labour supply as in Klump (1993) or Barro and Sala-i-Martin (1995). In this context, international trade, by increasing the elasticity of substitution, leads to lower domestic employment in the long run whereas monetary policy may be able to increase employment at least in the short run. Thus, under certain circumstances, trade and monetary policy can be regarded as complementary with respect to their labour market effects.

On the Affiliation of Phenomenology and Ordoliberalism: Links between Edmund Husserl, Rudolf and Walter Eucken

Abstract This paper explores the various personal and intellectual links between Edmund Husserl, Rudolf and Walter Eucken. Our interdisciplinary approach gives an insight into Husserls transcendental phenomenology, Walter Euckens Ordoliberalism as well as in the interdependency between phenomenology and economics for which Rudolf Euckens philosophy of intellectual life plays an important role. Particular affiliations between phenomenology and economics can be found in the following topics: epistemology, the idea of man, the comprehension of liberty and the importance of legal or social orders, institutional rules and frameworks of regulations.

The Role of Culture in Economic Theorizing and Empirical Economic Research

Over the last decade, general interest in the cultural determinants of economic behavior and economic development was characterized by a remarkable cycle. It reached its upper turning point in 1994 when “Foreign Affairs” enthusiastically declared: “Culture is in. From business consultants to military strategists, people talk about culture as the deepest and most determinative aspect of human life.” (Zakaria 1994, p. 125) Only one year later, the same journal launched an intensive debate about the significance of culture by publishing Samuel Huntington’s investigation of a possible “clash of civilizations” (Huntington 1995), and Francis Fukuyama (1995) came out with his provocative study of the “underestimated influence of culture on economic development.”

An Ordoliberal Interpretation of Adam Smith

Summary The aim of the following paper is to examine the complementarities (and divergences) between the ‘Paleo-liberal’ Adam Smith and the Ordoliberal Walter Eucken. Following the hypothesis that Smith is among the forerunners and predecessors of Ordoliberalism and Social Market Economy, we try to provide the reader with an insight into the socio-political philosophy of Smith and Eucken pointing at similarities and differences alike. Therefore, we base our examination on a systematic primary source text analysis comparing the books and essays written by Eucken and Smith. The paper tackles these questions in two main steps: The first part highlights Smith’s and Eucken’s complex and interdependent system of natural liberty. The second section reviews Smith’s and Eucken’s philosophy of the state.

The effects of public pensions on private wealth: evidence on the German savings puzzle

Based on German panel data between 1984 and 1999, we test for the interaction of social security benefits and private wealth formation. In a simple life-cylce model benefits from public pension systems should displace equal amounts of private retirement accumulation. Our estimate for the offset effect, corrected for several possible measurement biases, is much lower, however, than expected from pure life-cycle considerations and less than comparable estimates for the US and the UK. This result thus supports other evidence on a particular German savings puzzle, which might be due to market imperfections and/or bounded rational behaviour.

Financial sector reform in Vietnam

This major Handbook provides country studies of the latest developments in financial reform in a selection of both developed and developing countries from Western Europe, North America, South America, Asia and Australia, written by acknowledged experts in their fields. The outcome is an up-to-date, authoritative and comprehensive account of the current world-wide attempt to refashion the way in which the financial services industry (and especially the banking sector) is regulated and supervised.

Poverty and government transfers in the United States

This article examines the long-term impact of government transfers on poverty in the United States using cointegration techniques. In contrast to most existing studies, we find that government transfers play an important poverty-reducing role.