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The Morishima Gross Elasticity of Substitution

  • Blackorby, Charles

    (University of Warwick)

  • Primont, Daniel

    (Southern Illinois University)

  • Russell, R. Robert

    (University of California, Riverside)

We show that the Hotelling-Lau elasticity of substitution, an extension of the Allen-Uzawa elasticity to allow for optimal output-quantity (or utility) responses to changes in factor prices, inherits all of the failings of the Allen-Uzawa elasticity identified by Blackorby and Russell [1989 AER]. An analogous extension of the Morishima elasticity of substitution to allow for output quantity changes preserves the salient properties of the original Hicksian notion of elasticity of substitution.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp_787.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 787.

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Length: 22 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:wrk:warwec:787
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Web page: http://www2.warwick.ac.uk/fac/soc/economics/

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  1. Blackorby, Charles & Russell, R Robert, 1981. "The Morishima Elasticity of Substitution; Symmetry, Constancy, Separability, and Its Relationship to the Hicks and Allen Elasticities," Review of Economic Studies, Wiley Blackwell, vol. 48(1), pages 147-58, January.
  2. 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 882-88, September.
  3. Lau, Lawrence J., 1978. "Applications of Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 3 McMaster University Archive for the History of Economic Thought.
  4. David Stern, 2011. "Elasticities of substitution and complementarity," Journal of Productivity Analysis, Springer, vol. 36(1), pages 79-89, August.
  5. Bertoletti Paolo, 2001. "The Allen/Uzawa Elasticity of Substitution as a Measure of Gross input Substitutability," Rivista italiana degli economisti, Società editrice il Mulino, issue 1, pages 87-94.
  6. George C. Davis & C. Richard Shumway, 1996. "To Tell the Truth about Interpreting the Morishima Elasticity of Substitution," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 44(2), pages 173-182, 07.
  7. Paolo Bertoletti, 2005. "Elasticities of Substitution and Complementarity: A Synthesis," Journal of Productivity Analysis, Springer, vol. 24(2), pages 183-196, October.
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