Empirical estimates of the elasticity of substitution of a KLEM production function without nesting constraints: The case of the Variable Output Elasticity-Cobb Douglas

Paul Malliet and Frédéric G. Reynès

No 333423, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: The outcome of Computable General Equilibrium models applied to climate crucially rely on the estimation of elasticities of substitution. We use a generalized production function that overcomes the restriction imposed by a nesting structure of the Constant Elasticity of Substitution (CES) production function assumed in most CGE models. Constructing a panel of 44 countries and 14 periods from the World Input-Output Database (WIOD) tables, we estimate the production functions for 54 sectors using a \textit{Seemingly Unrelated Regression} model. We compare these results to two standard KLEM nesting structures used in CES specification and find direct implications on the estimation results, especially for Capital-Energy substitutability. The more general form of the CES production function on which we rely, the Variable Output Elasticity-Cobb Douglas (VOE-CB) supports substitution between these two inputs.

Keywords: International Relations/Trade; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Pages: 35
Date: 2022
New Economics Papers: this item is included in nep-eff, nep-ene and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/333423/files/11054.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:333423

Access Statistics for this paper

More papers in Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().