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CES, DIVISIA and 400+ SIGMAS

Author

Listed:
  • Eliyathamby A Selvanathan

    (Economics and Business Statistics Discipline Griffith Business School, Griffith University)

  • Kenneth W Clements

    (Business School, The University of Western Australia)

  • Saroja Selvanathan

    (Economics and Business Statistics Discipline Griffith Business School, Griffith University)

Abstract

The link between the Constant Elasticity of Substitution (CES) and Divisia index numbers gives rise to a revealing way to obtain preliminary estimates of the elasticity of substitution. This approach, which is related to stochastic index numbers, is illustrated with 23 countries. The 400+ estimates of 𝜎 mostly lie between 0 and 1 with median 0.61, which is not unreasonable for a 12-commodity level of aggregation.

Suggested Citation

  • Eliyathamby A Selvanathan & Kenneth W Clements & Saroja Selvanathan, 2021. "CES, DIVISIA and 400+ SIGMAS," Economics Discussion / Working Papers 21-16, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:21-16
    Note: MD5 = ca17019d3c9766a01eaaa5ab70425a2f
    as

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    File URL: https://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2021/DP%2021.16_Selvanathan%20Clements%20and%20Selvanathan.pdf
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    References listed on IDEAS

    as
    1. Kenneth W. Clements, 2019. "Four Laws of Consumption," The Economic Record, The Economic Society of Australia, vol. 95(310), pages 358-385, September.
    2. Selvanathan, E. Antony, 1985. "An even simpler differential demand system," Economics Letters, Elsevier, vol. 19(4), pages 343-347.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    constant elasticity of substitution; Divisia indices; stochastic index numbers; price variance; quantity variance;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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