The Existence of Factor Substitution in the Primary Aluminum Industry: A Multivariate Error-Correction Approach Using Norwegian Panel Data

Kjersti-Gro Lindquist

Empirical Economics, 1995, vol. 20, issue 3, 83 pages

Abstract: This paper presents an econometric analysis of factor demands in the Norwegian primary aluminium industry using annual plant-level panel data. The translog cost function approach is applied, and a multivariate error-correction model of the cost shares of labour, raw materials and electricity is estimated. Capital is assumed to be quasi-fixed. The hypothesis of fixed input coefficients is rejected for this industry, but the estimated own-price and cross-price elasticities suggest that relative price variations have limited effect on conditional factor demands.

Date: 1995
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