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How Misleading Can Allen Elasticities Of Substitution Be?

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  • Taylor, Timothy G.
  • Gupta, Gautam

Abstract

The Allen elasticity of substitution has recently been shown to be an incorrect measure of substitutability when there are more than two inputs. This paper presents an empirical comparison of the Morishima and Allen elasticities based on a translog cost function estimated using data for aggregate southeastern U.S. Agriculture. The results indicate substantial differences. in the two measures.

Suggested Citation

  • Taylor, Timothy G. & Gupta, Gautam, 1990. "How Misleading Can Allen Elasticities Of Substitution Be?," 1990 Annual meeting, August 5-8, Vancouver, Canada 270855, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea90:270855
    DOI: 10.22004/ag.econ.270855
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    References listed on IDEAS

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    1. Charles Blackorby & R. Robert Russell, 1981. "The Morishima Elasticity of Substitution; Symmetry, Constancy, Separability, and its Relationship to the Hicks and Allen Elasticities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(1), pages 147-158.
    2. 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 882-888, September.
    3. Fuss, Melvyn A., 1977. "The demand for energy in Canadian manufacturing : An example of the estimation of production structures with many inputs," Journal of Econometrics, Elsevier, vol. 5(1), pages 89-116, January.
    4. Y. Mundlak, 1968. "Elasticities of Substitution and the Theory of Derived Demand," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 35(2), pages 225-236.
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    Cited by:

    1. Ahmad, Munir & Bravo-Ureta, Boris & Wackernagel, Rick, 1993. "Factor Substitution in Dairy Farming: A Comparison of Allen and Morishima Elasticities," MPRA Paper 72934, University Library of Munich, Germany.
    2. Fernandez-Cornejo, Jorge, 1992. "Short- And Long-Run Demand And Substitution Of Agricultural Inputs," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 21(1), pages 1-14, April.

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