Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities)
Although the Allen-Uzawa elasticity of substitution (AES) has been a standard statistic reported in empirical studies of production and consumption, no intuition was provided to convince one that it is a natural generalization of Hick's 2-variable elasticity of substitution. It is shown that, w...
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| Veröffentlicht in: | The American economic review 1989-09, Vol.79 (4), p.882-888 |
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| creator | Blackorby, Charles Russell, R. Robert |
| description | Although the Allen-Uzawa elasticity of substitution (AES) has been a standard statistic reported in empirical studies of production and consumption, no intuition was provided to convince one that it is a natural generalization of Hick's 2-variable elasticity of substitution. It is shown that, while the AES reduces to the original Hicksian concept in the 2-dimensional case, in general, it preserves none of the salient properties of the Hicksian idea. In particular, the AES: 1. is not a measure of the ease of substitution, or curvature of the isoquant, 2. provides no information about relative factor shares, and 3. cannot be interpreted as a logarithmic derivative of a quantity ratio with respect to a price ratio or the marginal rate of substitution. It is also shown that an alternative concept, originally formulated by Morishima (1967), preserves these salient features of the original Hicksian concept. |
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In particular, the AES: 1. is not a measure of the ease of substitution, or curvature of the isoquant, 2. provides no information about relative factor shares, and 3. cannot be interpreted as a logarithmic derivative of a quantity ratio with respect to a price ratio or the marginal rate of substitution. 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Robert</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities)</atitle><jtitle>The American economic review</jtitle><date>1989-09-01</date><risdate>1989</risdate><volume>79</volume><issue>4</issue><spage>882</spage><epage>888</epage><pages>882-888</pages><issn>0002-8282</issn><eissn>1944-7981</eissn><coden>AENRAA</coden><abstract>Although the Allen-Uzawa elasticity of substitution (AES) has been a standard statistic reported in empirical studies of production and consumption, no intuition was provided to convince one that it is a natural generalization of Hick's 2-variable elasticity of substitution. It is shown that, while the AES reduces to the original Hicksian concept in the 2-dimensional case, in general, it preserves none of the salient properties of the Hicksian idea. In particular, the AES: 1. is not a measure of the ease of substitution, or curvature of the isoquant, 2. provides no information about relative factor shares, and 3. cannot be interpreted as a logarithmic derivative of a quantity ratio with respect to a price ratio or the marginal rate of substitution. It is also shown that an alternative concept, originally formulated by Morishima (1967), preserves these salient features of the original Hicksian concept.</abstract><cop>Menasha, Wis</cop><pub>The American Economic Association</pub><tpages>7</tpages></addata></record> |
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| source | Business Source Complete; Periodicals Index Online; Jstor Complete Legacy |
| subjects | Capital Cost functions Curvature Economic conditions Economic elasticity Economic growth Economic models Economic theory Economy Elasticity Income Labor Labor force Mathematical constants Mathematical functions Percentage change Price elasticity Production functions Search services Shares Substitution |
| title | Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities) |
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