Substitution and price elasticity estimates using inter-country pooled data in a translog cost model

Abstract

Pooled data across several developing countries and the U. S. were used to estimate long-run substitution and price elasticities in a translog framework for the paper, iron and steel, and aggregate manufacturing industries. While the quality of the estimates varies across the several industry-specific models, the results suggest higher values for these elasticities than appear commonly used in integrated assessment models. Estimates of own-price elasticities of energy range from − 0.80 to − 1.76 and are comparable to estimates from previous econometric studies in the context of developed countries (− 0.77 to − 0.87). Substitution elasticities show wider variation across countries and industries. For energy and capital they range from − 1.96 to 9.80, for labor and energy from 2.61 to 7.11, and for energy and material from − 0.26 to 2.07.