Elasticities of substitution and complementarity
AbstractThis paper develops a classification scheme of the many different definitions of elasticities of substitution and complementarity in the production case based on duality, gross and net substitution, elasticity type, and four different basic concepts of substitution and complementarity is developed. The classic Berndt-Wood dataset is used to show how the various elasticities differ. This variation is considerable and shows that the correct elasticity should be used for the intended purpose â there is no one true elasticity of substitution. The paper also reintroduces and clarifies Pigouâs contributions to the debate on the elasticity of substitution after seventy years of obscurity in which they have not been cited.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Productivity Analysis.
Volume (Year): 36 (2011)
Issue (Month): 1 (August)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100296
Microeconomics; History of economic thought; Production; Substitution; Elasticity; B21; D12; D24;
Other versions of this item:
- David I. Stern, 2004. "Elasticities of Substitution and Complementarity," Rensselaer Working Papers in Economics 0403, Rensselaer Polytechnic Institute, Department of Economics.
- Stern, David I, 2008. "Elasticities of Substitution and Complementarity," MPRA Paper 12454, University Library of Munich, Germany.
- B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hongil Lim & C. Richard Shumway, 1997. "Technical Change and Model Specification: U.S. Agricultural Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 543-554.
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- Lau, Lawrence J., 1978. "Applications of Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 3 McMaster University Archive for the History of Economic Thought.
- Syrquin, Moshe & Hollender, Gideon, 1982. "Elasticities of Substitution and Complementarity: The General Case," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 515-19, November.
- Thompson, Peter & Taylor, Timothy G, 1995. "The Capital-Energy Substitutability Debate: A New Look," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 565-69, August.
- Kim, H Youn, 1992. "The Translog Production Function and Variable Returns to Scale," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 546-52, August.
- Mark J. Koetse & Henri L.F. de Groot & Raymond J.G.M. Florax, 2006.
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Tinbergen Institute Discussion Papers
06-061/3, Tinbergen Institute.
- Koetse, Mark J. & de Groot, Henri L.F. & Florax, Raymond J.G.M., 2008. "Capital-energy substitution and shifts in factor demand: A meta-analysis," Energy Economics, Elsevier, vol. 30(5), pages 2236-2251, September.
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- Olivier Grandville, 1997. "Curvature and the elasticity of substitution: Straightening it out," Journal of Economics, Springer, vol. 66(1), pages 23-34, February.
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- 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.
- Stern, David I., 2008. "Derivation of the Hicks Elasticity of Substitution from the Input Distance Function," MPRA Paper 12414, University Library of Munich, Germany.
- Samuelson, Paul A, 1974. "Complementarity-An Essay on the 40th Anniversary of the Hicks-Allen Revolution in Demand Theory," Journal of Economic Literature, American Economic Association, vol. 12(4), pages 1255-89, December.
- Sato, Ryuzo & Koizumi, Tetsunori, 1973. "On the Elasticities of Substitution and Complementarity," Oxford Economic Papers, Oxford University Press, vol. 25(1), pages 44-56, March.
- Paolo Bertoletti, 2005. "Elasticities of Substitution and Complementarity: A Synthesis," Journal of Productivity Analysis, Springer, vol. 24(2), pages 183-196, October.
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- Diewert, W. E., 1973. "Functional forms for profit and transformation functions," Journal of Economic Theory, Elsevier, vol. 6(3), pages 284-316, June.
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- Blackorby, Charles & Primont, Daniel & Russell, R. Robert, 2007. "The Morishima Gross Elasticity of Substitution," The Warwick Economics Research Paper Series (TWERPS) 787, University of Warwick, Department of Economics.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- "Elasticities of Substitution and Complementarity" to be published in Journal of Productivity Analysis
by David Stern in Stochastic Trend on 2010-12-08 21:02:00
- Paper Accepted at Economics Letters
by David Stern in Stochastic Trend on 2010-05-19 22:59:00
- Final Hub Report
by David Stern in Stochastic Trend on 2010-03-26 05:16:00
- Revise and Resubmit
by David Stern in Stochastic Trend on 2009-08-30 23:54:00
- Designing a Job Talk
by David Stern in Stochastic Trend on 2009-07-07 14:42:00
- Interfuel Substitution and the Costs of Climate Change Policy
by David Stern in Stochastic Trend on 2009-07-03 01:38:00
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