A Note on the Two-Input Arc Elasticity of Substitution
AbstractThis 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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Bibliographic InfoArticle provided by El Colegio de México, Centro de Estudios Económicos in its journal Estudios Económicos.
Volume (Year): 23 (2008)
Issue (Month): 2 ()
arc elasticity; substitution elasticity;
Find related papers by JEL classification:
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D33 - Microeconomics - - Distribution - - - Factor Income Distribution
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- 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.
- Samuelson, Paul A, 1973. "Relative Shares and Elasticities Simplified: Comment," American Economic Review, American Economic Association, vol. 63(4), pages 770-71, September.
- Diewert, W Erwin, 1978. "Superlative Index Numbers and Consistency in Aggregation," Econometrica, Econometric Society, vol. 46(4), pages 883-900, July.
- 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.
- Andres Vazquez, 1998. "An alternative definition of the arc elasticity of demand," Journal of Economic Studies, Emerald Group Publishing, vol. 25(6), pages 553-562, October.
- 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.
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