Elasticities of substitution and complementarity

Abstract

Microeconomics, History of economic thought, Production, Substitution, Elasticity, B21, D12, D24,

Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation

“…For aggregate production functions, it is most commonly measured by the Hicks Elasticity of Substitution (HES), as given in Equation (3), where ∂ / ∂ is the marginal productivity of input , and / is the marginal productivity of input . The HES is thus a measure of the curvature of the production function isoquant, or as Stern writes, the "difficulty of substitution" ( [10], p. 80).…”

“…The first relates to the confusion and mis-use stemming from multiple definitions of elasticity of substitution in common use-Stern [10] for example reviews ten different elasticities, including the Allen Elasticity of Substitution (AES), Cross-price elasticity (CPE), and Morishima Elasticity of Substitution (MES). Whilst different elasticities may be appropriate for different purposes-for example Klump and de La Grandville [161] recommended the use of MESs when studying economic growth, whereas Sancho employs HESs for CGE model calibration [118]-the multiple definitions are confusing.…”

Decomposing energy demand across BRIIC countries

“…Consequently, they argued that the AES cannot be interpreted as an indicator of the curvature of a production technology. To this end, they proposed the Morishima (1967) elasticity of substitution (MES) as a more appropriate measure of the ES since it allows for the evaluation of the elasticity of change in input ratios with respect to price ratios for a given level of output, while allowing for input adjustments, holding prices constant (see Stern, 2011). Furthermore, unlike the AES, the MES is asymmetric in nature, hence .…”

“…Furthermore, unlike the AES, the MES is asymmetric in nature, hence . Stern (2011) argues that a measure such as the MES which allows for optimal input changes is more appropriate for capturing changes in factor shares when all inputs are variable within a cost-minimizing production technology. The MES is given as: (8) The MES measures the percentage change in the ratio k/l due changes in the price of l so that if then an increase in the price of l stimulates an increase in the optimal use of input k relative to the optimal use of l (in other words, input k substitutes for l).…”

The economic viability of value-based food chain for dairy farms in mountain regions: an econometric analysis approach

“…Elasticity for variables x 22 and x 66 (Table 4) have been calculated with the methodology presented by Turk et al (2013) and Stern (2004). Results explain that the increase of the selling price of drinking milk produced by Planika Dairy for 1 %, means the losses of buying milk for -0,49 % from dairy farms, Table 4.…”