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The Morishima Elasticity of Substitution for the Variable Profit Function and the Demand for Imports in the United States

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  • Subhash C. Sharma

    (Southern Illinois University, U.S.A.)

Abstract

In this article, I derive expressions for the Morishima elasticities of substitution (MES) for the variable profit function and estimate these elasticities to shed some light on the substitutability between imports, capital services, and labor services. The results reveal that capital services and imports are Morishima substitutes, irrespective of whether the price of capital services or imports changes, and imports and labor services are also Morishima substitutes, irrespective of whether the price of imports or the wage rate changes. Thus, an increase in the price of U.S. imports (through tariffs or duties) will result in substitution (in the Morishima sense) into labor and capital services. Copyright 2002 by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Resarch Association

Suggested Citation

  • Subhash C. Sharma, 2002. "The Morishima Elasticity of Substitution for the Variable Profit Function and the Demand for Imports in the United States," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 115-135, February.
    • Handle: RePEc:ier:iecrev:v:43:y:2002:i:1:p:115-135
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    Cited by:

    1. Ma, Chunbo & Stern, David I., 2016. "Long-run estimates of interfuel and interfactor elasticities," Resource and Energy Economics, Elsevier, vol. 46(C), pages 114-130.
    2. Guy Chapda Nana & Bruno Larue, 2014. "Imposing curvature conditions on flexible functional forms for GNP functions," Empirical Economics, Springer, vol. 47(4), pages 1411-1440, December.
    3. Getu Hailu & John Cranfield & Rawlin Thangaraj, 2010. "Do U.S. food processors respond to sweetener-related health information?," Agribusiness, John Wiley & Sons, Ltd., vol. 26(3), pages 348-368.
    4. K. K. Gary Wong & Belton M. Fleisher & Min Qiang Zhao & William H. McGuire, 2022. "Technical progress and induced innovation in China: a variable profit function approach," Journal of Productivity Analysis, Springer, vol. 57(2), pages 177-191, April.
    5. Xiaobing Wang & Futoshi Yamauchi & Jikun Huang, 2016. "Rising wages, mechanization, and the substitution between capital and labor: evidence from small scale farm system in China," Agricultural Economics, International Association of Agricultural Economists, vol. 47(3), pages 309-317, May.
    6. Napasintuwong, Orachos & Emerson, Robert D., 2004. "Labor Substitutability In Labor Intensive Agriculture And Technological Change In The Presence Of Foreign Labor," 2004 Annual meeting, August 1-4, Denver, CO 20048, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Chapda Nana, Guy & Larue, Bruno & Gervais, Jean-Philippe, 2012. "Regional integration and dynamic adjustments: Evidence from gross national product functions for Canada and the United States," The North American Journal of Economics and Finance, Elsevier, vol. 23(2), pages 246-264.
    8. Egger, Hartmut & Egger, Peter & Greenaway, David, 2007. "Intra-industry trade with multinational firms," European Economic Review, Elsevier, vol. 51(8), pages 1959-1984, November.
    9. Frank W. Agbola & Stephen R. Harrison, 2005. "Empirical investigation of investment behaviour in Australia's pastoral region," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(1), pages 47-62, March.
    10. Elisabetta Magnani & David Prentice, 2006. "Unionization and Input Flexibility in U.S. Manufacturing, 1973 – 1996," ILR Review, Cornell University, ILR School, vol. 59(3), pages 386-407, April.
    11. David Stern, 2011. "Elasticities of substitution and complementarity," Journal of Productivity Analysis, Springer, vol. 36(1), pages 79-89, August.
    12. Chapda Nana, Guy & Larue, Bruno, 2012. "Imposing Curvature Conditions on Flexible Functional Forms to GNP Functions," Working Papers 123308, University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE).

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