CES, DIVISIA and 400+ SIGMAS

Eliyathamby A Selvanathan, Kenneth Clements and Saroja Selvanathan
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Eliyathamby A Selvanathan: Economics and Business Statistics Discipline Griffith Business School, Griffith University

No 21-16, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: The link between the Constant Elasticity of Substitution (CES) and Divisia index numbers gives rise to a revealing way to obtain preliminary estimates of the elasticity of substitution. This approach, which is related to stochastic index numbers, is illustrated with 23 countries. The 400+ estimates of 𝜎 mostly lie between 0 and 1 with median 0.61, which is not unreasonable for a 12-commodity level of aggregation.

Keywords: constant elasticity of substitution; Divisia indices; stochastic index numbers; price variance; quantity variance (search for similar items in EconPapers)
JEL-codes: C13 D12 (search for similar items in EconPapers)
Pages: 19
Date: 2021
Note: MD5 = ca17019d3c9766a01eaaa5ab70425a2f
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