Input Substitution Elasticities Research Articles

Divergent Sectorial Paths in Productivity and Long-term Inflation

The relationship between inflation and relative price variability (RPV) has been observed since the last century; recently, the subject has inspired much theoretical and empirical work. It has been claimed that relative price variability plays an autonomous role not only with respect to the aggregate inflation rate, but also with respect to the GDP growth rate, the interest rate and the monetary growth rate. We have developed an Input–Output (IO) model integrating real and cost-prices, which can accommodate different values of input substitution elasticities according to changes in relative prices, to explore the nature of this relationship in the Italian case. Our IO approach and the results show first, that the relationship also occurs at the structural level, and second, that the causal mechanism of the relationship involves divergent trends in sectorial productivity, with the following crucial factors: the adjustment of the compensation to productivity due to the primary factors, the substitution of f...

Evaluating the Returns to Postharvest Research in the Florida Citrus‐Processing Subsector

AbstractWidely used econometric techniques for evaluation of returns to research are often limited to macrolevel analysis because the data required are either unavailable or difficult to measure at the micro, or subsector, level. A translog cost function and corresponding share equations are estimated in order to measure the returns to postharvest Florida citrus‐processing research. Estimation of this system also allows computation of input substitution elasticities and evaluation of the effects of research and development on an input's share in total cost. It is shown that expenditures allocated to citrus‐processing research have a high rate of return.

Substitutions among energy imputs in U.S. manufacturing

With cross-section data on the purchases of four energy inputs by 11 U.S. manufacturing industries, Allen partial cross elasticities of input substitution and own price elasticities of demand were computed. The sample set represents 85 percent of total manufacturing energy demand in 1962. The substitution elasticities between fuel oil and natural gas, fuel oil and purchased electricity, and between natural gas and electricity, were statistically significant for about half of the 11 two-digit SIC industries studied. These elasticities ranged between 12.9 and 1.7 with half of them less than 4.0.