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Non-CES Aggregators: A Guided Tour

Author

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  • Kiminori Matsuyama

    (Department of Economics, Northwestern University, Evanston, Illinois, USA)

Abstract

The constant-elasticity-of-substitution (CES) aggregator and its demand system are ubiquitous in business cycles theory, macroeconomic growth and development, international trade and other general equilibrium fields; this is because the CES aggregator has many knife-edge properties that help to keep the analysis tractable in the presence of many goods and factors. However, this also makes it hard to tell which properties of CES are responsible for certain results. Furthermore, it is necessary to relax some of those properties for certain applications. In this article, I review several classes of non-CES aggregators, each of which removes some properties of CES and keeps the rest to introduce some flexibility while retaining the tractability of CES as much as possible. These classes are named after the properties of CES they keep. I explain how these classes are related to each other and discuss their relative strengths and weaknesses to indicate which classes are suited for which applications.

Suggested Citation

  • Kiminori Matsuyama, 2023. "Non-CES Aggregators: A Guided Tour," Annual Review of Economics, Annual Reviews, vol. 15(1), pages 235-265, September.
    • Handle: RePEc:anr:reveco:v:15:y:2023:p:235-265
    DOI: 10.1146/annurev-economics-082322-013910
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    Keywords

    aggregators; nonhomothetic preferences; CRS production functions; implicit additivity; gross substitutes; gross complements; essentials; inessentials;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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