Territorial Analysis of the Elasticities of Substitution of Production Factors in the Colombian Manufacturing Industry (1992–2018)

Julian Augusto Casas Herrera and Jhancarlos Gutiérrez-Ayala
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Julian Augusto Casas Herrera: Universidad Pedagógica y Tecnológica de Colombia
Jhancarlos Gutiérrez-Ayala: Universidad Pedagógica y Tecnológica de Colombia

Lecturas de Economía, 2021, issue 94, 223-255

Abstract: The article presents the estimation of the price and substitution elasticities of demand between inputs, labor, intermediate material, capital, energy, and other production expenses for the industrial manufacturing sector of Colombia (the central region and the department of Boyacá). The estimates were made through the application of translogarithmic cost functions with data for the period 1992 - 2018 from the Annual Manufacturing Survey. Results show a low substitution level between capital and labor in the national scenario, with an elasticity of 0.08%. In the case of the department of Boyacá, the relationship was complementary; increases of 1% in the price of capital are related to an average reduction of 0.17% in the demand for labor. These results show differences in the average relative participation of the production factors in the total cost, which allows for the conclusion that the dynamics of the national, regional, and department industrial sectors are heterogeneous.

Keywords: manufacturing industry; production factors; elasticities; translogarithmic function; SURE (search for similar items in EconPapers)
JEL-codes: C51 D01 D24 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.17533/udea.le.n94a343836

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