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Piketty Outside Mainstream Estimates of Substitutability Between Labor and Capital

Created on September 12, 2014

Piketty Outside Mainstream Estimates of Substitutability Between Labor and Capital

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Read the original report, "Understanding Thomas Piketty and His Critics," by Curtis S. Dubay and Salim Furth.

Notes: The elasticity of substitution between capital and labor describes how effectively each factor can replace the other in production. A higher elasticity indicates that the two can be more easily substituted. All elasticities have been adjusted so that they apply to non-residential (or “corporate”) capital and are gross of depreciation. Except for Piketty’s estimate, ranges are represented by their midpoints. Sources: Robert S. Chirinko, “σ. The Long and Short of It,” Journal of Macroeconomics, Vol. 30, Issue 2 (June 2008), pp. 671–686, http://www.sciencedirect.com/science/article/pii/S0164070407001619 (accessed July 2014); Loukas Karabarbounis and Brent Neiman, “The Global Decline of the Labor Share,” The Quarterly Journal of Economics, Vol. 129, No. 1 (February 2014), pp. 61–103; and Thomas Piketty, Capital in the Twenty-First Century(Cambridge, MA: Belknap Press of Harvard University, 2014)..

CHART 1 • BG 2954

Tags: Thomas-Piketty, Capital-in-the-Twenty-First-Century, inequality