Piketty’s Elasticity of Substitution: A Critique

Gregor Semieniuk

45 citations0/0 files storedReview of Political Economy

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Economic Theory and Policy Income, Poverty, and Inequality Political Economy and Marxism

Abstract

This article examines Thomas Piketty’s explanation of a falling wage share. Piketty explains rising income inequality between labor and capital as a result of one parameter of a production function: an elasticity of substitution, σ, between labor and capital greater than one. This article reviews Piketty’s elasticity argument, which relies on a non-standard definition of capital. In light of the theory of land rent, it discusses why the non-standard capital definition is a measure of wealth, not capital and is problematic for estimating elasticities. It then presents simple long-run estimates of σ in constant elasticity of substitution functions for Piketty’s data as well as for a subset of his capital measure that comes closer to the standard definition of productive capital. The estimation results cast doubt on Piketty’s hypothesis that σ is greater than one.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 45 citations exist upstream.

References

1987Co-Integration and Error Correction: Representation, Estimation, and Testing 2014Capital in the Twenty-First Century 2014On the Principles of Political Economy, and Taxation 1954History of Economic Analysis, by Joseph A. Schumpeter, Elizabeth Boody Schumpeter 1996Numerical distribution functions for unit root and cointegration tests 1961Capital Accumulation and Economic Growth 2014Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010 *1904An Inquiry into the Nature and Causes of the Wealth of Nations.

Cited by

2021Measuring capital-labor substitution: The importance of method choices and publication bias 2019WHAT DETERMINES THE ELASTICITY OF SUBSTITUTION BETWEEN CAPITAL AND LABOR? A LITERATURE REVIEW 2019Income shares, secular stagnation and the long‐run distribution of wealth 2020Does Entrepreneurship Affect Income Inequality within Countries? Direct and Indirect Effects in European Countries

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.