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Elasticities of Substitution and Complementarity: A Synthesis

  • Paolo Bertoletti

    ()

We derive the relationships between the net and gross elasticities of substitution and complementarity (i.e., the elasticities that refer either to the conditional or unconditional, direct or inverse demand system) in the general case of non-homothetic, variable-returns-to-scale technologies. We also show that the so-called Hicks Elasticity of Complementarity (Hicks, Oxford economic Papers 22, 289–296 (1970)) is dual to a full-fledged elasticity of gross input substitution that we call the Hotelling/Lau Elasticity of Substitution (Lau, Production Economics: A Dual Approach to Theory and Applications. Amsterdam: North-Holand (1978)). The former is, in fact, the proper elasticity of substitution in the case of the inverse, unconditional input demand. Our results should clarify some issues about the input substitutability classification. Copyright Springer Science+Business Media, Inc. 2005

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File URL: http://hdl.handle.net/10.1007/s11123-005-4703-3
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Article provided by Springer in its journal Journal of Productivity Analysis.

Volume (Year): 24 (2005)
Issue (Month): 2 (October)
Pages: 183-196

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Handle: RePEc:kap:jproda:v:24:y:2005:i:2:p:183-196
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100296

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