Estimating CES Aggregate Production Functions of China and India

摘要

We have observed remarkably different patterns in the development processes of China and India. For example, data from our sample show that, comparing with India, China has considerably higher rates of physical capital formation as well as much higher ratios of measured physical to human capital. Motivated by these empirical observations, we estimate the key technological parameters of a CES production function with physical and human capital using panel data at the provincial level for China and at the state level for India, respectively. Our estimation results on the distributional parameter and the elasticity of substitution between the input factors yield implications that match broadly with the above stylized factor accumulation patterns in China and India.