The Morishima Gross elasticity of substitution
Blackorby, Charles, 1937-, Primont, Daniel and Russell, R. Robert (2007) The Morishima Gross elasticity of substitution. Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers).
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We show that the Hotelling-Lau elasticity of substitution, an extension of the Allen-Uzawa elasticity to allow for optimal output-quantity (or utility) responses to changes in factor prices, inherits all of the failings of the Allen-Uzawa elasticity identified by Blackorby and Russell [1989 AER]. An analogous extension of the Morishima elasticity of substitution to allow for output quantity changes preserves the salient properties of the original Hicksian notion of elasticity of substitution.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Elasticity (Economics), Demand (Economic theory), Substitution (Economics), Factor analysis|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Number of Pages:||22|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|References:||Allen, G. D.,and J. R. Hicks. “A Reconsideration of the Theory of Value, Part II.” (1934). Economica 1, 196–219. Bertoletti, P. “The Allen/Uzawa Elasticity of Substitution as a Measure of Gross Input Substitutability.” (2001) Rivista italiana degli economisti 6, 87–94. Bertoletti, P. “Elasticities of Substitution and Complementarity” A Synthesis.” (2005). Journal of Productivity Analysis 24, 183–196. Blackorby, C., and R. R. Russell. “The Partial Elasticity of Substitution.” (1975). Discussion Paper No. 75-1, Department of Economics, University of California, San Diego. Blackorby, C., and R. R. Russell. “The Morishima Elasticity of Substitution: Symmetry, Constancy, Separability, and Its Relationship to the Hicks and Allen Elasticities.” (1981). Review of Economic Studies 48, 147–158. Blackorby, C., and R. R. Russell. “Will the Real Elasticity of Substitution Please Stand Up?.” (1989). American Economic Review 79, 882–888. Davis, G. C., and C. R. Shumway. “To Tell the Truth about Interpreting the Morishima Elasticity of Substitution.” (1996). Canadian Journal of Agricultural Economics 44, 173–182. Hicks, J. R. The Theory of Wages. (1932). London: Macmillan. Kim, H. Y. “The Antonelli Versus Hicks Elasticity of Complementarity and Inverse Input Demand Systems.” (2000). Australian Economic Papers 39, 245–261. Lau, L. “Applications of Profit Functions.” In M. Fuss and D. McFadden (eds.), Production Economics: A Dual Approach to Theory and Applications, Vol. I. Amsterdam: North-Holland. Stern, D. I. “Elasticities of Substitution and Complementarity.” (2004). Rensselaer Working Papers in Economics, Number 0403, Rensselaer Polytechnic Institute. Uzawa, H. “Production Functions with Constant Elasticities of Substitution.” (1962). Review of Economic Studies 29, 291–299.|
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