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A method for calibrating input (and output) price elasticities

Philippine Review of Economics

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Title A method for calibrating input (and output) price elasticities
 
Creator Alba, Michael M.; De La Salle University
Briones, Roehlano M.; Philippine Institute for Development Studies
 
Subject calibration; elasticities; substitution matrix; cost function; Euler's Theorem; Shephard's Lemma
 
Description We propose a theoretically consistent method for calibrating input (and output) price elasticities (of agricultural crops) from a minimal set of given estimates. Our review of production theory suggests three starting points for the exercise: (a) inputs and outputs have to be classified by input nonjointness, (b) production functions may be assumed to be linearly homogeneous, and (c) given an n x n (symmetric) matrix of elasticities, which has n(n+1)/2 distinct cells, the values of n(n-1)/2 of the distinct cells must be known to solve the n unknown elasticities. Exploiting Shephard’s Lemma and Euler’s Theorem, we work out the method for a cost function with four inputs. We also provide a numerical example involving a 9 x 9 matrix of a multiple-output profit function.Classification-JEL: C63, D21, Q12
 
Publisher Philippine Review of Economics
 
Contributor —
 
Date 2010-09-02
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.econ.upd.edu.ph/pre/index.php/pre/article/view/4
 
Source Philippine Review of Economics; Vol 46, No 2 (2009): Papers in Honor of Rolando A. Danao
1655-1516
 
Language eng
 
Relation http://www.econ.upd.edu.ph/pre/index.php/pre/article/view/4/667
 
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