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A Note on the Two-Input Arc Elasticity of Substitution

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  • Andrés Vázquez

    (Spanish Council for Scientific Research)

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    Abstract

    This note suggests a measure for the two-input arc elasticity of substitution that comes up naturally and preserves the salient characteristic of the Hicks-Robinson original concept. In particular, (i) it gives the average value of point substitution elasticities over the logarithmic arc of the input price ratio, and leads therefore to the exact estimation of the CES production function family, and (ii) its relationships with the discrete change in factor shares are formally parallel to those well known for the point elasticity assumption.

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    File URL: http://codex.colmex.mx:8991/exlibris/aleph/a18_1/apache_media/HEAFYIQR4M97832R7QJPHV1ELG7J3S.pdf
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    Bibliographic Info

    Article provided by El Colegio de México, Centro de Estudios Económicos in its journal Estudios Económicos.

    Volume (Year): 23 (2008)
    Issue (Month): 2 ()
    Pages: 313-322

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    Handle: RePEc:emx:esteco:v:23:y:2008:i:2:p:313-322

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    Web page: http://www.colmex.mx/centros/cee/
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    Related research

    Keywords: arc elasticity; substitution elasticity;

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    1. Bigman, David, 1978. "Derived Demand and Distributive Shares in a Multifactor Multisector Model," American Economic Review, American Economic Association, vol. 68(5), pages 923-28, December.
    2. M. Bronfenbrenner, 1960. "A Note on Relative Shares and the Elasticity of Substitution," Journal of Political Economy, University of Chicago Press, vol. 68, pages 284.
    3. Samuelson, Paul A, 1973. "Relative Shares and Elasticities Simplified: Comment," American Economic Review, American Economic Association, vol. 63(4), pages 770-71, September.
    4. Anderson, R. K. & Moroney, J. R., 1993. "Morishima elasticities of substitution with nested production functions," Economics Letters, Elsevier, vol. 42(2-3), pages 159-166.
    5. Blackorby, Charles & Russell, R Robert, 1989. "Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities)," American Economic Review, American Economic Association, vol. 79(4), pages 882-88, September.
    6. Diewert, W Erwin, 1978. "Superlative Index Numbers and Consistency in Aggregation," Econometrica, Econometric Society, vol. 46(4), pages 883-900, July.
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