This paper examines the relation between aggregate elasticity of substitution (AES) and capital accumulation (the AES- K relation) in a two-level, two-sector Solow growth model. There are two intermediate goods produced by capital and labor, while the final good is produced by combining the two intermediate goods. When capital (labor) is only used in producing one of the intermediate goods, then a negative (positive) AES- K relation is the likely outcome. Without specific factors in production,