Derivation of the Hicks Elasticity of Substitution from the Input Distance Function
David Stern ()
MPRA Paper from University Library of Munich, Germany
The Hicks or direct elasticity of substitution is traditionally derived from the production function. This paper exploits duality theory to present a more general derivation from the input distance function, which is exactly dual to the Shadow Elasticity of Substitution. The new elasticity is more general than the traditional one as it can handle situations of technical inefficiency, nonseparability between inputs and outputs, and multiple outputs, but is equal to the traditional elasticity under the classical conditions. The new derivation is related to the Morishima and Antonelli Elasticities of Complementarity in the same way that the Shadow Elasticity of Substitution is related to the Morishima and Allen-Uzawa Elasticities of Substitution. Furthermore, distance (technical efficiency) is not constant for the Morishima and Antonelli Elasticities of Complementarity
Keywords: Microeconomics; production; substitution (search for similar items in EconPapers)
JEL-codes: B21 D21 D24 (search for similar items in EconPapers)
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