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A Note on the Two-Input Arc Elasticity of Substitution

Author

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  • Andrés Vázquez

    (Spanish Council for Scientific Research)

Abstract

This note suggests a measure for the two-input arc elasticity of substitution that comes up naturally and preserves the salient characteristic of the Hicks-Robinson original concept. In particular, (i) it gives the average value of point substitution elasticities over the logarithmic arc of the input price ratio, and leads therefore to the exact estimation of the CES production function family, and (ii) its relationships with the discrete change in factor shares are formally parallel to those well known for the point elasticity assumption.

Suggested Citation

  • Andrés Vázquez, 2008. "A Note on the Two-Input Arc Elasticity of Substitution," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 23(2), pages 313-322.
  • Handle: RePEc:emx:esteco:v:23:y:2008:i:2:p:313-322
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    File URL: http://estudioseconomicos.colmex.mx/archivo/EstudiosEconomicos2008/313-322.pdf
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    References listed on IDEAS

    as
    1. Andres Vazquez, 1998. "An alternative definition of the arc elasticity of demand," Journal of Economic Studies, Emerald Group Publishing, vol. 25(6), pages 553-562, October.
    2. Bigman, David, 1978. "Derived Demand and Distributive Shares in a Multifactor Multisector Model," American Economic Review, American Economic Association, vol. 68(5), pages 923-928, December.
    3. 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.
    4. Samuelson, Paul A, 1973. "Relative Shares and Elasticities Simplified: Comment," American Economic Review, American Economic Association, vol. 63(4), pages 770-771, September.
    5. M. Bronfenbrenner, 1960. "A Note on Relative Shares and the Elasticity of Substitution," Journal of Political Economy, University of Chicago Press, vol. 68, pages 284-284.
    6. Diewert, W Erwin, 1978. "Superlative Index Numbers and Consistency in Aggregation," Econometrica, Econometric Society, vol. 46(4), pages 883-900, July.
    7. Anderson, R. K. & Moroney, J. R., 1993. "Morishima elasticities of substitution with nested production functions," Economics Letters, Elsevier, vol. 42(2-3), pages 159-166.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    arc elasticity; substitution elasticity;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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