_blank' style='font-weight:bold;text-decoration:none;border:1px solid #d5d5d5;padding:1px 3px;height:17px; line-height:17px; display:inline-block;' onclick='SetNum(90626)' >XML Download Download as PDF (Size:345KB) PP. 240-246
DOI: 10.4236/tel.2019.91019    313 Downloads   660 Views
Author(s)
James Feigenbaum

Affiliation(s)

Utah State University, Logan, UT, USA.

ABSTRACT

It is well known for a Cobb-Douglas production function that the elasticity of a factor demand is the inverse of the share of output going to the other factors. Since Cobb-Douglas has a unit elasticity of substitution, the demand elasticity trivially equals the ratio of the elasticity of substitution to the share of output going to the other factor. I show here that this result can be generalized to any constant returns to scale production function. As a result, if a factor is known to be a substitute for (complement of) other factors, the inverse of the share of output going to other factors will be a lower (upper) bound for the factor’s elasticity of demand.

KEYWORDS

Elasticity of Substitution, Elasticity of Labor Demand, Output Share

Cite this paper

Feigenbaum, J. (2019) A Nonparametric Formula Relating the Elasticity of a Factor Demand to the Elasticity of Substitution. Theoretical Economics Letters, 9, 240-246. doi: 10.4236/tel.2019.91019.
TEL Subscription
E-Mail Alert
TEL Most popular papers
Publication Ethics & OA Statement
TEL News
Frequently Asked Questions
Recommend to Peers
Recommend to Library
Contact Us

Copyright © 2020 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.