Sector-wise productivity growths are measured, along with the sectoral elasticity of substitutions, under the multi-factor CES framework, by regressing the growths of factor-wise cost shares against the growths of relative factor prices. We use linked input-output tables for Japan and Korea as the data source for factor price and cost shares in two timely distant states. We then construct a multi-sectoral general equilibrium model using the system of estimated CES unit cost functions, and evaluate the economy-wide propagation of an exogenous productivity gain, in terms of welfare. Further, we examine the differences between models based on a priori elasticities such as Leontief and Cobb-Douglas.
↧