A Nonparametric Formula Relating the Elasticity of a Factor Demand to the Elasticity of Substitution

Autor:	James A. Feigenbaum
Rok vydání:	2019
Předmět:	Price elasticity of demand Returns to scale Elasticity of substitution Econometrics Nonparametric statistics Inverse Elasticity (economics) Mathematics
Zdroj:	Theoretical Economics Letters. :240-246
ISSN:	2162-2086 2162-2078
Popis:	It is well known for a Cobb-Douglas production function that the elasticity of a factor demand is the inverse of the share of output going to the other factors. Since Cobb-Douglas has a unit elasticity of substitution, the demand elasticity trivially equals the ratio of the elasticity of substitution to the share of output going to the other factor. I show here that this result can be generalized to any constant returns to scale production function. As a result, if a factor is known to be a substitute for (complement of) other factors, the inverse of the share of output going to other factors will be a lower (upper) bound for the factor’s elasticity of demand.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::d674149937df805e2cb6d423c9d1fcc5 https://doi.org/10.4236/tel.2019.91019 Zobrazit plný text záznamu