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Sectoral Elasticities of Substitution Between Capital and Labor in a Developing Economy: Times Series Analysis in the Case of Postwar Chile

Jere R. Behrman

Abstract

The estimation of a CES production function for real sectoral value added with factor augmenting technological change first is discussed, with emphasis on the possible effects of the deflation procedure utilized and on the attempt to estimate relatively long-run parameters. The estimates of that function for nine Chilean sectors then are examined with respect to the implied degree of sectoral flexibility, the absorption of surplus labor, the implications for linear assumptions about Chilean production functions, the distribution of income, and the degree of constraint on long-run growth due to a relative shortage of a primary factor.