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A Note on the Two-Input Arc Elasticity of Substitution

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  • Andrés Vázquez

    (Spanish Council for Scientific Research)

Abstract

This note suggests a measure for the two-input arc elasticity of substitution that comes up naturally and preserves the salient characteristic of the Hicks-Robinson original concept. In particular, (i) it gives the average value of point substitution elasticities over the logarithmic arc of the input price ratio, and leads therefore to the exact estimation of the CES production function family, and (ii) its relationships with the discrete change in factor shares are formally parallel to those well known for the point elasticity assumption.

Suggested Citation

  • Andrés Vázquez, 2008. "A Note on the Two-Input Arc Elasticity of Substitution," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 23(2), pages 313-322.
    • Handle: RePEc:emx:esteco:v:23:y:2008:i:2:p:313-322
    as

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    File URL: https://estudioseconomicos.colmex.mx/index.php/economicos/article/view/131/133
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    References listed on IDEAS

    as
    1. Bigman, David, 1978. "Derived Demand and Distributive Shares in a Multifactor Multisector Model," American Economic Review, American Economic Association, vol. 68(5), pages 923-928, December.
    2. Kiyoshi Kuga, 1979. "On the Symmetry of Robinson Elasticities of Substitution: The General Case," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(3), pages 527-531.
    3. Diewert, W Erwin, 1978. "Superlative Index Numbers and Consistency in Aggregation," Econometrica, Econometric Society, vol. 46(4), pages 883-900, July.
    4. Andres Vazquez, 1998. "An alternative definition of the arc elasticity of demand," Journal of Economic Studies, Emerald Group Publishing, vol. 25(6), pages 553-562, October.
    5. Blackorby, Charles & Russell, R Robert, 1989. "Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities)," American Economic Review, American Economic Association, vol. 79(4), pages 882-888, September.
    6. Samuelson, Paul A, 1973. "Relative Shares and Elasticities Simplified: Comment," American Economic Review, American Economic Association, vol. 63(4), pages 770-771, September.
    7. Anderson, R. K. & Moroney, J. R., 1993. "Morishima elasticities of substitution with nested production functions," Economics Letters, Elsevier, vol. 42(2-3), pages 159-166.
    8. Sato, Kazuo, 1976. "The Ideal Log-Change Index Number," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 223-228, May.
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    More about this item

    Keywords

    arc elasticity; substitution elasticity;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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