Curvature Conditions and Substitution Pattern among Capital, Energy, Materials and Heterogeneous Labour


Falk, Martin ; Koebel, Bertrand


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URL: http://ub-madoc.bib.uni-mannheim.de/644
URN: urn:nbn:de:bsz:180-madoc-6447
Document Type: Working paper
Year of publication: 1999
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: J31 J21 E23 ,
Subject headings (SWD): Preiselastizität , Kapital , Energie , Arbeit
Abstract: This study deals with the determinants of factor demand in 27 industries of the manufactoring sector during the period 1978 to 1990. Using a quadratic cost function, six production factors are distinguished: capital, energy, three types of labour and intermediate materials. A parametric test of the concavity of the cost function in prices is provided and price elasticities are compared when curvature conditions are imposed or not. The results show, firstly, that in general estimates do not appear very sensitive to imposing theoretical restrictions implied by optimising behaviour. Secondly, demand for unskilled labour is relatively elastic to wage increases compared to the higher skill levels. Third, the substitutability is stronger between unskilled and medium skilled labour than any other pairs of inputs.
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Falk, Martin ; Koebel, Bertrand (1999) Curvature Conditions and Substitution Pattern among Capital, Energy, Materials and Heterogeneous Labour. Open Access [Working paper]
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