Derivation of the Hicks Elasticity of Substitution from the Input Distance Function
AbstractThe Hicks or direct elasticity of substitution is traditionally derived from the production function. This paper exploits duality theory to present a more general derivation from the input distance function, which is exactly dual to the Shadow Elasticity of Substitution. The new elasticity is more general than the traditional one as it can handle situations of technical inefficiency, nonseparability between inputs and outputs, and multiple outputs, but is equal to the traditional elasticity under the classical conditions. The new derivation is related to the Morishima and Antonelli Elasticities of Complementarity in the same way that the Shadow Elasticity of Substitution is related to the Morishima and Allen-Uzawa Elasticities of Substitution. Furthermore, distance (technical efficiency) is not constant for the Morishima and Antonelli Elasticities of Complementarity
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 12414.
Date of creation: 30 Dec 2008
Date of revision:
Microeconomics; production; substitution;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- 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
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