Some Theorems of Trade and General Equilibrium with Many Goods and Factors

Chang, Winston W.

doi:10.2307/1910416

Cited by 85 publications

(32 citation statements)

References 30 publications

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“…Diminishing marginal productivity implies x ii < 0 for i = K, L, E. Symmetric cross partials x KL , x KE , and x LE may be positive or negative, but additional inputs should typically raise other marginal products. Chang (1979) shows that a negative H is sufficient for concavity of the production function in the present model with three inputs. Own effects on marginal products such as x EE must outweigh cross effects such as x LE and x KE , implying negative own substitution terms such as δE/δe in (13).…”

Section: Energy Cross Price Substitution Elasticitiesmentioning

confidence: 60%

The applied theory of energy substitution in production

Thompson

2006

Energy Economics

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This paper reviews the applied theory of energy cross price partial elasticities of substitution, and presents it in a transparent fashion. It uses log linear and translog production and cost functions due to their economic properties and convenient estimating forms, but the theory applies other functional forms. The objective is to encourage increased empirical research that would deepen understanding and appreciation of energy substitution.The economic outcome of decisions regarding energy policy often hinge on substitution between energy and other factors of production, but there is little consensus regarding the degree and even direction of energy substitution. As classic examples, Berndt and Wood (1975) find aggregate energy a substitute for labor but a complement with capital, while Griffin and Gregory (1976) find energy a substitute for both. Only continued theoretical and empirical investigation will be able to shed light on this issue, and the opaque dispersed literature on the theory of substitution must discourage new research.The empirical literature on energy cross price elasticities is thin relative to the economic impact of energy substitution.The present paper presents a transparent theory of energy substitution using log linear (Cobb Douglas) and translog production and cost functions. The focus is on the derivation of cross price elasticities that describe the substitution of inputs due to a change in the price of an input. For instance, cross price elasticities describe the adjustment in capital and labor inputs to a higher price of energy, or the

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Section: Energy Cross Price Substitution Elasticitiesmentioning

confidence: 60%

The applied theory of energy substitution in production

Thompson

2006

Energy Economics

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“…Chang (1979) shows its determinant ∆ is negative with three factors given neoclassical concavity. Cross price substitution elasticities are symmetric σ ij = σ ji and homogeneity implies substitution elasticities sum to zero Σ i σ ji = 0.…”

Section: An Applied 3x2 General Equilibrium Modelmentioning

confidence: 99%

Wages in a factor proportions time series model of the US

Thompson

2010

The Journal of International Trade & Economic Development

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The theoretical effects of changes in prices and factor endowments on wages in general equilibrium models have been examined under various assumptions. The present paper is the first to estimate wage effects in the context of this theory. The data cover the US real wage, labor force, fixed capital assets, energy input, and prices of manufactures and services from 1949 to 2006. Estimated input elasticites of the wage are consistent with labor in the middle of the factor intensity ranking, and energy as very intensive in manufacturing. The estimation technique quantifies fundamental influences on the labor market.

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“…where^represents percentage change, as developed by Chang (1979) and Takayama (1982). The ten equations in (6) and (7) are put into matrix format as:…”

Section: Specific Factors Model Of Production For Venezuelamentioning

confidence: 99%

Workers and trade liberalization: simulating the potential impact of the FTAA on Venezuela's output and wages

Toledo

2006

Applied Economics

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The Specific Factors model of production and trade with seven skilled labour categories and specific capital in three leading sectors of the Venezuelan economy is used to produce comparative static elasticities of changing prices on factor prices and output as a result of the emerging Free Trade Agreement of the Americas (FTAA). Results show that every labour group except production labour is projected to lose under free trade, while manufacturing capital gains at the expense of capital in agriculture and services due to a projected increase in export demand. Adjustments to free trade are large implying the importance of economic policy in the transition period to free trade.

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Some Theorems of Trade and General Equilibrium with Many Goods and Factors

Cited by 85 publications

References 30 publications

The applied theory of energy substitution in production

The applied theory of energy substitution in production

Wages in a factor proportions time series model of the US

Workers and trade liberalization: simulating the potential impact of the FTAA on Venezuela's output and wages

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