The Nested Binary CES Composite Production Function: CRTS with different (but constant) pair-wise elasticities of substitution among three factors
The policy debate on global warming has raised the prospect of large taxes on Greenhouse pollutants leading to a very substantial rise in the price of energy. Models in which output is produced according to a technology in which capital (K), labour (L) and energy (E) are substitutable run into the difficulty of how to allow parsimoniously for the higher likely substitutability between K and E than between L and E. Nesting all three factors in a single CES aggregator function is unsatisfactory because of the constancy over pairs of factors of partial substitution elasticities. This paper is a variation on the CES theme. It presents a new composite three-input production function (based on CES and Leontief components) which allows the partial substitution elasticities between capital and labour, capital and energy, and between labour and energy, to differ but to remain individually constant.
|Date of creation:||Apr 1998|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 03 9919 1877
Web page: http://www.copsmodels.com/about.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hanoch, Giora, 1971. "CRESH Production Functions," Econometrica, Econometric Society, vol. 39(5), pages 695-712, September.
- Joaquim Oliveira Martins & Jean-Marc Burniaux & John P. Martin & Giuseppe Nicoletti, 1992. "The Costs of Reducing CO2 Emissions: A Comparison of Carbon Tax Curves with GREEN," OECD Economics Department Working Papers 118, OECD Publishing.
When requesting a correction, please mention this item's handle: RePEc:cop:wpaper:op-89. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Horridge)
If references are entirely missing, you can add them using this form.