Since physical capital share in production is measurable and observable in reality, should it be calibrated or estimated? Some scholars consider physical capital share in production as a deep parameter and therefore should be calibrated other than estimation, otherwise, estimating physical capital share instead of calibration may contaminate the estimation of other non-deep parameters. Does this idea sound reasonable?
Thank you very much and look forward to hearing from you.
Should physical capital share in production function be calibrated or estimated
This is mostly a matter of efficiency of estimation. Most people calibrate this share because it is only weakly identified by the business cycle moments usually the subject of estimation. Thus, many people fix it based on long-run growth evidence, i.e. the trend typically removed from the data.