The Allen--Uzawa elasticity of substitution for nonhomogeneous production functions
Elena Burmistrova, Sergey Lobanov
TL;DR
This paper extends the validity of the Allen-Uzawa elasticity of substitution to nonhomogeneous production functions, clarifying misconceptions caused by previous incorrect examples.
Contribution
It proves that the Allen-Uzawa elasticity representation applies to nonhomogeneous functions, correcting prior criticisms based on flawed examples.
Findings
The representation holds for nonhomogeneous functions.
Previous criticisms were based on incorrect examples.
The elasticity concept is more broadly applicable than previously thought.
Abstract
This note proves that the representation of the Allen elasticity of substitution obtained by Uzawa for linear homogeneous functions holds true for nonhomogeneous functions. It is shown that the criticism of the Allen-Uzawa elasticity of substitution in the works of Blackorby, Primont, Russell is based on an incorrect example.
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Taxonomy
TopicsPolitical Economy and Marxism · Economic Theory and Policy · Economic Growth and Productivity