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Empirical Estimation of the Elasticity of Substitution : A Review

Author

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  • Vern Caddy

Abstract

This review of time series and cross-sectional studies indicates that there is little agreement as to the "true" value of the elasticity of substitution. There appears to be no clear-cut explanation for the diversity of the estimates. Not only do the various studies attribute widely different absolute levels to the elasticity of substitution in the industries considered, but there is also no apparent consistency between the ordinal rankings of the industries within each study. There is however a general pattern of differences between the cross-sectional and time series estimates -- namely, the former are usually larger (averaging about 1) than the latter (averaging perhaps about 0.5). Please note: The PDF download of this fairly old paper is an optical scan.

Suggested Citation

  • Vern Caddy, 1976. "Empirical Estimation of the Elasticity of Substitution : A Review," Centre of Policy Studies/IMPACT Centre Working Papers op-09, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:op-09
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    1. Long-term job?
      by Bruno Duarte in EUnomics on 2018-10-02 20:50:33

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    Cited by:

    1. Don Fullerton & Gilbert E. Metcalf, 2002. "Environmental Controls, Scarcity Rents, and Pre-existing Distortions," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 26, pages 504-522, Edward Elgar Publishing.
    2. Bakoup, Ferdinand & Tarr, David, 1998. "How integration into the Central African Economic and Monetary Community affects Cameroon's economy: general equilibrium estimates," Policy Research Working Paper Series 1872, The World Bank.
    3. repec:wvu:wpaper:10-06 is not listed on IDEAS
    4. Jaime de Melo & Julie Stanton & David Tarr, 2015. "Revenue-Raising Taxes: General Equilibrium Evaluation of Alternative Taxation in U.S. Petroleum Industries," World Scientific Book Chapters, in: Modeling Developing Countries' Policies in General Equilibrium, chapter 24, pages 505-529, World Scientific Publishing Co. Pte. Ltd..
    5. Rod Tyers & Yongzheng Yang, 1997. "Trade with Asia and skill upgrading: Effects on labor markets in the older industrial countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(3), pages 383-418, September.
    6. Fullerton, Don & Metcalf, Gilbert E., 2002. "Cap and trade policies in the presence of monopoly and distortionary taxation," Resource and Energy Economics, Elsevier, vol. 24(4), pages 327-347, November.
    7. Lawrence H. Goulder & John B. Shoven & John Whalley, 1982. "Domestic Tax Policy and the Foreign Sector: The Importance of Alternative Foreign Sector Formulations to Results from a General Equilibrium," NBER Working Papers 0919, National Bureau of Economic Research, Inc.
    8. Adams, Philip D., 1987. "Agricultural Supply Response in ORANI," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 55(03), pages 1-17, December.
    9. Lim Jean & Rodríguez-Zamora Carolina, 2010. "The Optimal Tax Rule in the Presence of Time Use," Working Papers 2010-05, Banco de México.
    10. Sherony, Keith R. & Knowles, Glenn J. & Boyd, Roy, 1991. "The Economic Impact Of Crop Losses: A Computable General Equilibrium Approach," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(1), pages 1-12, July.
    11. Östblom, Göran, 1999. "An Environmental Medium Term Economic Model - EMEC," Working Papers 69, National Institute of Economic Research.

    More about this item

    Keywords

    Capital; labour; elasticity of substitution;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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