Capital-labor substitution in a developing country: The case of Greece

The present paper reports an attempt to estimate the elasticity of capital-labor substitution, and the rate of technical change in the manufacturing sector of the Greek economy. It is found that the elasticity of substitution exceeds unity, and the annual rate of neutral technical change is e^0.05 = 1.05. It is concluded that because of the case of capital-labor substitution the existing labor shortages should not impair the further development of the economy.