JEEA-FBBVA Lecture 2018: The Microeconomic Foundations of Aggregate Production Functions.

Baqaee, David Rezza; Farhi, Emmanuel

Aggregate production functions are reduced-form relationships that emerge endogenously from input–output interactions between heterogeneous producers and factors in general equilibrium. We provide a general methodology for analyzing such aggregate production functions by deriving their first- and second-order properties. Our aggregation formulas provide nonparametric characterizations of the macroelasticities of substitution between factors and of the macrobias of technical change in terms of microsufficient statistics. They allow us to generalize existing aggregation theorems and to derive new ones. We relate our results to the famous Cambridge–Cambridge controversy.

LECTURES & lecturing; EQUILIBRIUM; STATISTICS

Journal of the European Economic Association, 2019, Vol 17, Issue 5, p1337

1542-4766

Academic Journal

10.1093/jeea/jvz050