Substituabilités entre demandes de facteurs induites par les demandes de biens

Answers to various questions of applied macroeconomics depend on the values given to elasticities of substitution between the demands for factors, these demands being aggregated across productive sectors. Such elasticities reflect not only substitutabilities within productive sectors, but also substitutabilities arising from the system of demand functions for goods, showing how the latter demands react to changes in relative prices of goods. A fairly general model leads to a relation linking changes in factor prices to changes in the aggregate demands for these factors. The relation is applied to particular specifications, especially to a simple CES economy and, for the case of two factors, to an economy in which the system of demand functions for goods is either CES or given by a now familiar non-homothetic specification. Thus, the relation exhibited here lends itself to studies about how, at the aggregate level, factor substitutabilities depend not only on the forms of production and goods demand functions, but also on heterogeneity across the set of parameters characterizing these functions.