A Note on the Two-Input Arc Elasticity of Substitution

Andrés Vázquez
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Andrés Vázquez: Spanish Council for Scientific Research

Estudios Económicos, 2008, vol. 23, issue 2, 313-322

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.

Keywords: arc elasticity; substitution elasticity (search for similar items in EconPapers)
JEL-codes: D24 D33 (search for similar items in EconPapers)
Date: 2008
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