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Elasticity of substitution and biased technical change in the CES production function for China's metal-intensive industries

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  • Zhu, Xuehong
  • Zeng, Anqi
  • Zhong, Meirui
  • Huang, Jianbai

Abstract

To achieve sustainable and green development, it is imperative for China, as the world's major metal consumer, to improve utilization efficiency and conservation of metal resources. Thus, understanding the industrial endogenous growth patterns of China regarding metal utilization and technical change becomes the prerequisite. Therefore, this paper regards metal as one of production factors nested with capital and labor, employs normalized supply-side system approach to estimate the elasticity of substitution in constant elasticity of substitution (CES) function and analyzes technical change bias based on the analytical framework built in this paper. Results show that: the optimal nesting structure for most metal-intensive industries are metal-capital composite nested with labor. And the metal input is less efficient than capital or labor in all metal-intensive industries. The technical change biases for metal-intensive industries are diversified, but only metal mining industries and heavy machinery manufacturing industries tend to save metal when expanding the production effectively. Targeted suggestions are made per industry according to the heterogeneity of production factors allocation and technical change biases.

Suggested Citation

  • Zhu, Xuehong & Zeng, Anqi & Zhong, Meirui & Huang, Jianbai, 2021. "Elasticity of substitution and biased technical change in the CES production function for China's metal-intensive industries," Resources Policy, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:jrpoli:v:73:y:2021:i:c:s0301420721002282
    DOI: 10.1016/j.resourpol.2021.102216
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