The Allen/Uzawa elasticity of substitution, still commonly used in the empirical studies to account for net substitutability, has been subject to a number of theoretical criticisms. In this paper we reconsider the Allen/Uzawa elasticity of substitution as a measure of gross substitutability, and show that to this relevant purpose it can be meaningfully interpreted in conjunction with the returns-to-scale properties of the technology.
Bertoletti, P. (2001). The Allen/Uzawa Elasticity of Substitution as a Measure of Gross Input Substitutability. RIVISTA ITALIANA DEGLI ECONOMISTI, 6(1), 87-94 [10.1427/3690].
The Allen/Uzawa Elasticity of Substitution as a Measure of Gross Input Substitutability
BERTOLETTI, P
2001
Abstract
The Allen/Uzawa elasticity of substitution, still commonly used in the empirical studies to account for net substitutability, has been subject to a number of theoretical criticisms. In this paper we reconsider the Allen/Uzawa elasticity of substitution as a measure of gross substitutability, and show that to this relevant purpose it can be meaningfully interpreted in conjunction with the returns-to-scale properties of the technology.
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