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The Antonelli versus Hicks Elasticity of Complementary and Inverse Input Demand Systems

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  • Kim, H Youn

Abstract

A true measure of input substitution associated with exogenous changes in input quantities requires that the output level be held constant. To this effect, this study presents the Antonelli elasticity of complementarity characterised by the distance function. The more common Hicks elasticity of complementarity assumes that marginal cost is constant and hence does not capture pure substitution effects. The two elasticities of complementarity are related to inverse demand systems and are shown to be equivalent under constant returns to scale. A framework for estimating the Antonelli elasticity from the uncompensated demand system is presented. Estimation results reveal substantial bias of input substitutability with the use of Hicks' measure. Copyright 2000 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

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  • Kim, H Youn, 2000. "The Antonelli versus Hicks Elasticity of Complementary and Inverse Input Demand Systems," Australian Economic Papers, Wiley Blackwell, vol. 39(2), pages 245-261, June.
  • Handle: RePEc:bla:ausecp:v:39:y:2000:i:2:p:245-61
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    Cited by:

    1. Stern, David I., 2010. "Derivation of the Hicks, or direct, elasticity of substitution using the input distance function," Economics Letters, Elsevier, vol. 108(3), pages 349-351, September.
    2. David Stern, 2011. "Elasticities of substitution and complementarity," Journal of Productivity Analysis, Springer, vol. 36(1), pages 79-89, August.
    3. Anonymous, 2014. "Elasticity of Substitution and Farm Heterogeneity in TFP and Size: A Theoretical Framework and Empirical Application to Australian Broadacre Farms," 2014 Conference (58th), February 4-7, 2014, Port Maquarie, Australia 165874, Australian Agricultural and Resource Economics Society.
    4. Daniel Graham & H. Kim, 2008. "An empirical analytical framework for agglomeration economies," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 42(2), pages 267-289, June.
    5. Stern, David I., 2008. "Derivation of the Hicks Elasticity of Substitution from the Input Distance Function," MPRA Paper 12414, University Library of Munich, Germany.

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