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I'm not a macroeconomist (so definitely not used to looking at those types of equations in that setting), but I think the intuition is that the estimated substitutability of labor and materials is <1 (see page 1048). As labor becomes more productive, you need relatively fewer units of it and shift resources towards the other (non-augmented) inputs. ...


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Production functions are defined without specific values for parameters, so they all could if you impose that the logical parameter implies a negative return. For example, consider a Cobb-Douglas production function of capital and labor, $Y=\beta_0 K^{\beta_k}L^{\beta_l}\omega \varepsilon$ where $\omega$ denotes firm-observed productivity and $\varepsilon$ ...


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