Search

Macroeconomic uncertainty regularly fluctuates in the data. Theory suggests complementarity between capital and labor inputs in production can generate time-varying endogenous uncertainty because the concavity in the production function influences how output responds to productivity shocks in different states of the economy. This paper examines whether complementarity is a quantitatively significant source of time-varying endogenous uncertainty by estimating a nonlinear real business cycle model with a constant elasticity of substitution production function and exogenous volatility shocks. When matching labor share and uncertainty moments, we find at most 16% of the volatility of uncertainty is endogenous. An estimated model without exogenous volatility shocks can endogenously generate all of the empirical variation in uncertainty, but only at the expense of significantly overstating the volatility of the labor share.

We study a pure-exchange incomplete-market economy with heterogeneous agents. In each period, the agents choose how much to save (i.e., invest in a risk-free bond), how much to consume, and which bundle of goods to consume while their endowments are fluctuating. We focus on a competitive stationary equilibrium (CSE) in which the wealth distribution is invariant, the agents maximize their expected discounted utility, and both the prices of consumption goods and the interest rate are market-clearing. Our main contribution is to extend some general equilibrium results to an incomplete-market Bewley-type economy with many consumption goods. Under mild conditions on the agents' preferences, we show that the aggregate demand for goods depends only on their relative prices and that the aggregate demand for savings is homogeneous of degree in prices, and we prove the existence of a CSE. When the agents' preferences can be represented by a CES (constant elasticity of substitution) utility function with an elasticity of substitution that is higher than or equal to one, we prove that the CSE is unique. Under the same preferences, we show that a higher inequality of endowments does not change the equilibrium prices of goods, and decreases the equilibrium interest rate. Our results shed light on the impact of market incompleteness on the properties of general equilibrium models.

The conventional functional form of the Constant-Elasticity-of-Substitution (CES) production function is a general production function nesting a number of other forms of production functions. Examples of such functions include Leontief, Cobb–Douglas, and linear production functions. Nevertheless, the conventional form of the CES production specification is still restrictive in multiple aspects. One example is the fact that the marginal effect of increasing input use always has to be to increase the variability of output quantity by the conventional construction of this function. This paper proposes a generalized variant of the CES production function that allows for various input effects on the probability distribution of output. Failure to allow for this possible input–output risk structure is indeed one of the limitations of the conventional form of the CES production function. This limitation may result in false inferences about input-driven output risk. In light of this, the present paper proposes a solution to this problem. First, it is shown that the familiar CES formulation suffers from very restrictive structural assumptions regarding risk considerations, and that such restrictions may lead to biased and inefficient estimates of production quantity and production risk. Following the general theme of Just and Pope’s approach, a CES-based production-function specification that overcomes this shortcoming of the original CES production function is introduced, and a three-stage Nonlinear Least-Squares (NLS) estimation procedure for the estimation of the proposed functional form is presented. To illustrate the proposed approaches in this paper, two empirical applications in irrigation and fertilizer response using the famous Hexem–Heady experimental dataset are provided. Finally, implications for modeling input-driven production risks are discussed.

Constant elasticity of substitution (CES) demand for monopolistically competitive firm-varieties is a standard tool for models in international trade and macroeconomics. Inter-variety substitution in this model follows a simple share proportionality rule. In contrast, the standard toolkit in industrial organization (IO) estimates a demand system in which cross-elasticities depend on similarity in observable attributes. The gain in realism from the IO approach comes at the expense of requiring richer data and greater computational challenges. This paper uses the dataset of Berry et al. (1995), who established the modern IO method, to simulate counterfactual trade policy experiments. We use the CES model as an approximation of the more complex underlying demand system and market structure. Although the CES model omits key elements of the data generating process, the errors are offsetting, leading to reasonably accurate counterfactual predictions. For aggregate outcomes, it turns out that incorporating non-unitary pass-through matters more than fixing oversimplified substitution patterns. We do so by extending the commonly used methods of Exact Hat Algebra and tariff elasticity estimation to take into account oligopoly.

Indonesia has undergone a transformation from agriculture to the manufacturing industry in 1971-1997. In the 2001-2015 period there was de-industrialization in developed countries. Likewise, Indonesia which shows a decrease in the contribution of GDP and manufacturing sector workforce to the economy. However, deindustrialization in Indonesia is premature / too fast. One of the policies to overcome this problem is with attention to the creative industry. With the existence of the creative industry, it can achieve several SDGs goals, namely the 8th goal, namely decent work and economic growth, the creative economy can increase economic growth, create jobs and increase exports (UNCTAD, 2010). However, the creative industry GDP growth that is below the RPJMN target is thought to indicate low productivity of the creative industry. According to IBS data, the craft sub-sector creative industry has a low production value. To see productivity can use technical efficiency. This study aims to evaluate the technical efficiency of creative industry in the craft sub-sector as well as to analyze the trend of variables that affect technical judgments. The method used is the CES production function and Data Envelopment Analysis. The results show that industries that have high total production factor values have a tendency to have high technical efficiency values as well. Furthermore, those arranged according to technical categories and binary logistic regression are used to determine trend variables that affect technical judgments. The technical efficiency of the craft, significantly by wages, investment status and company scale.

PurposeThe purpose of this study is to elaborate the theoretical mechanism of rural credit input affecting the urban–rural income gap from the perspective of labor transfer, and use a dynamic panel mediation model to test the transmission mechanism of rural credit input affecting the urban–rural income gap through labor transfer, so as to provide an empirical basis for narrowing the urban–rural income gap in China.Design/methodology/approachThis paper constructs a mechanism analysis framework for rural credit input affecting the urban–rural income gap. From the perspective of resource allocation and labor transfer, the authors expound the transmission path of rural credit input to the urban–rural income gap and analyze the theoretical mechanism of rural credit input that affects the urban–rural income gap through labor transfer. Based on this, this paper uses the dynamic panel mediation model to test the effect relationship between rural credit input, labor transfer and urban–rural income gap in 31 provinces of China from 2009 to 2018.FindingsIn theory, increasing rural credit input can ease the financial constraints on the development of “agriculture, rural areas and farmers” and provide capital accumulation for the development of rural non-agricultural industries. The development of rural non-agricultural industries can provide more jobs for rural surplus labor, thereby increasing the labor rate of return in rural areas, and ultimately conducive to narrowing the urban–rural income gap. Further, increasing rural credit input can improve the development level of rural non-agricultural industries, thereby promoting the transfer of agricultural labor. At the same time, rural credit input based on the intermediary variable of labor transfer has a significant inhibitory effect on the urban–rural income gap.Research limitations/implicationsThis study mainly focuses on the relationship between rural credit input, labor transfer and urban–rural income gap, so it is impossible to use micro-level data to further verify the impact of rural credit input on labor transfer. At the same time, the collection of indicators of rural credit investment in the China Financial Yearbook only started in 2009, which limited the number of samples to a certain extent.Practical implicationsThis paper assumes that the economy is mainly composed of urban and rural economic sectors. Therefore, labor can flow freely between urban and rural areas. However, in the near future, China's rural secondary and tertiary industries may develop rapidly, especially with the in-depth implementation of rural revitalization strategy, it is very important to pay attention to the current situation of rural industrial structure and incorporate the factors such as rural industrial structure into the existing model.Social implicationsThis study attempts to provide a new perspective and inspiration for rural credit input, the optimal allocation of labor force and narrowing the urban–rural income gap under China's rural revitalization strategy.Originality/valueBased on the analysis framework of neoclassical economic theory, this paper uses the constant elasticity of substitution production function to establish an urban–rural two-sector nested model that includes credit supply variables and analyzes the mechanism of rural credit input affecting the urban–rural income gap through labor transfer.

The constant elasticity of substitution (CES for short) is a basic property widely used in some areas of economics that involves a system of second-order nonlinear partial differential equations. One of the most remarkable results in mathematical economics states that under homogeneity condition i.e. the production function is a homogeneous function of a certain degree, there are no other production models with the CES property apart from the famous Cobb–Douglas and Arrow–Chenery–Minhas–Solow production functions. In this paper we generalize this classification result to a much wider framework of production functions under quasi-homogeneity conditions, showing in particular the existence of three new classes of production models with the CES property.

This paper revisits the "race to the bottom" phenomenon in a simple game theoretic framework. We consider two countries and one multinational firm, which requires two inputs that are imperfect substitutes. In the benchmark model the labour of each country specializes in a distinct input. Seeking to maximize their labour incomes, countries simultaneously announce wages following which the firm chooses its labour employment in each country. We show that "race to the bottom" (countries setting minimum possible wages) is never an equilibrium. Moreover there are equilibria with ``race to the top", that is, countries set maximum possible wages. This result is robust in an extended model where prior to competing in wages, each country can make input-specific investments to make its labour available for one or both inputs. Provided the production function of the firm is not asymmetrically intensive in either one of the two inputs, there are equilibria of the extended game with specialization (that is, countries invest in distinct inputs) as well as "race to the top".

The article analyses balance between the capital and labor market in the CIS countries rich in hydrocarbon resources – Azerbaijan, Kazakhstan and Russia. For this purpose, the impact of capital (fixed assets) and labor (employed population) on the production volume (on GDP) was estimated based on the relevant statistical data from these countries using production function analysis. The parameters of CES production function were determined in the Mathcad system by the nonlinear least-squares method. The subject of the research has enhanced relevance due to the lack of extensive research of the problem posed in the oil and gas-rich countries of the CIS, and the research evaluates the balance between capital and labor markets for the first time in resource-abundant countries. From the results, it can be seen that for each of these three countries the distribution coefficient for capital is significantly higher than that for the labor factor. This means that there is an excess of capital that cannot be started. This is typical for the countries rich in natural resources. The main reason for this process is the complex structure of increasing capital with oil revenues and low level of specialization of the existing labor force to launch this capital. Moreover, according to the results obtained from the CES production function, the substitute elasticity coefficient in oil-rich countries of the CIS is less than one. The study summarizes the current problem as an imbalance between the capital (fixed assets created using modern technology) and the labor market (labor to leverage key assets using potential opportunities). Based on the analysis, the results obtained from modeling is formulated and scientifically grounded recommendations have been provided for the improvement of education and its quality in these three countries, especially in Russia and Azerbaijan.

PurposeThe purpose of this study is to examine whether the elasticity of substitution (ES) varies between developed and developing countries.Design/methodology/approachThe author derives the growth regressions from the Solow model under the constant elasticity of substitution production function by using the first-order Taylor series expansion and estimate them for each country group classified based on time-varying behavior of income per worker using the data-driven algorithm.FindingsThe ES is not unitary and varies among country groups. Developed countries generally have a higher ES than developing countries.Originality/valueFor the first time, the author uses the first-order Taylor series expansion to linearize the steady-state value of income per worker, as the author considers this approach to be relatively more straight-forward and tractable. Furthermore, the author estimates the equations using both cross-section and panel data techniques and employs the data-driven algorithm proposed by Phillips and Sul (2007) to classify countries.

This study systematically examines, with the aid of modern microeconomic theory, the theoretical foundations of the direct rebound effect caused by energy efficiency improvement of private consumers. It establishes a utility maximization problem for the private consumer and analyses consumer behaviors under different classical functional forms of household production, such as Cobb–Douglas, Leontief and Constant Elasticity of Substitution (CES) when energy efficiency improves at the household level. Furthermore, it builds upon existing knowledge of the rebound effect and proposes a generalized nested functional form of household production behavior allowing for understanding the energy efficiency improves of an appliance where energy is not the only input to produce a certain service, such as kilometers traveled. This study contributes to the theoretical literature in direct rebound effect and provides insights on the rebound break-even condition of the household production function. The backfire condition is also discussed under different functional forms of the household production function. It shows that under certain circumstances, where elasticity of substation is large, backfire will be unavoidable when energy efficiency improves.

The production function has always been an active field in the research and application of economics. Researchers generally use the production function of constant elasticity of substitution, i.e., the C–D (Cobb–Douglas) production function and the CES (Constant Elasticity of Substitution) production function, to explore economic growth, but rarely use the VES (Variable Elasticity of Substitution) production function. The paper gives an extended VES production function model in the case the elasticity of substitution is a time linear function. With regard to the parameter estimation, the paper uses a modern intelligent algorithm, i.e., the PSO (Particle Swarm Optimization) algorithm. The conventional PSO algorithm has a low rate and the poor accuracy of convergence, so the paper proposes an improved PSO algorithm. In the final part, the paper calculates the contribution rates of influencing factors to Chinese economic growth, and the results are consistent with the actual situation.

Bu çalışmamız sabit ikame esnekliği üretim fonksiyonunun özelliklerini incelemektedir. Sabit ikame esnekliğini tanımlayan diferansiyel denklemin çözülmesiyle, bu çalışmada üretim fonksiyonuna ait yapısal değişkenler tam olarak elde edilmektedir. Literatürde ve daha önce modellenmiş sabit ikame esnekliği üretim fonksiyonlarında bu parametrelerin serbest olduğu varsayılmaktaydı. Hâlbuki bu çalışma üretim faktörlerinin dağılımı ve verimlilik parametrelerinin gelişigüzel sabitler olmadığını, ikame esnekliğinin birer fonksiyonu olduklarını ispat etmektedir. Ayrıca, bu iki değişken böylelikle, faktör üretkenliğinin sınır değer davranışlarını da açıklamaktadır. Bu bulgu, model parametreleri, faktör üretkenliği ve ekonomik büyüme hızı arasındaki ilişkinin tekrar ele alınması açısından literatüre katkı sunmaktadır. Bu çalışmanın sonuçları ek olarak faktör üretkenliklerinin sınır koşullardaki davranışını bilmenin daha zengin ekonomi-politik uygulamalara imkân tanıdığını göstermektedir. Böylelikle politika yapıcılar açısından, ekonomik büyüme hızını artırmayı hedefleyen alternatif politikalara alan açılmaktadır., This study investigates the properties of constant elasticity of substitution production function. Solving the differential equation which defines elasticity of substitution, this study exactly defines the model parameters of production function. In the literature, in previous variant models, those parameters have been widely accepted as free variables. However, this paper demonstrates that the distribution of production factors and technology (efficiency) parameters are not arbitrarily free constants, but are indeed functions of elasticity of substitution and moreover they determine the limiting behavior of factor productivities. This finding contributes to the literature by reconsidering and revising the relationship between model parameters, factor productivities and rate of growth for output of the economy. The results of this study suggest that the economic implications of limiting behavior of factor productivities are deeper than previously considered. This gives more room to designing alternative growth-enhancing policies across the world.

Multilateral methods are increasingly being used in the computation of official price indexes such as the consumer price index (CPI). This reflects the growing use of scanner data by statistical agencies and the fact that fixed‐based or chained price comparisons perform poorly in this context. A range of multilateral approaches have been pursued by different statistical agencies. Yet, it can be shown that some of these methods, at least theoretically, could suffer from substitution bias. We investigate this as well as the drivers of chain drift. We adopt a simulation‐based approach using actual scanner data prices with the corresponding quantities being generated assuming constant elasticity of substitution (CES) preferences. We find that most methods systematically deviate from the exact CES benchmark index. This is even the case for the superlative index methods, which should not exhibit substitution bias. Interestingly, we also find significant chain drift even in the exact CES indexes. We argue this reflects life cycle pricing and particularly run‐out sales at the end of a product's life.

Purpose This study aims to identify and classified non-tariff measures (NTMs) on Brazilian imports of robusta coffee beans, calculated a tariff-equivalent of non-tariff barriers (NTBs) and assessed the effects of removing NTBs from upstream and downstream domestic instant coffee supply chain. Design/methodology/approach The analysis uses documentary research to identify NTMs and the price-wedge method is applied to estimate a tariff-equivalent. The effects of suppressing the tariff-equivalent were evaluated using a partial equilibrium model with constant elasticity of substitution (Armington, 1969) and by incorporating vertical integration and uncertainty (Hallren and Opanasets, 2018). Findings The results show that NTMs seemingly hinder the entrance of coffee beans into the domestic market. The tariff-equivalent was estimated at 13.61%. Suppressing it reveals that the share of domestic coffee beans used to produce domestic instant coffee falls 0.21 p.p. while the share of domestic instant coffee consumed by the international trade rises 8.60 p.p. Originality/value What makes this paper original is that this paper investigated the effects of NTMs in a developing country, namely, Brazil. Although Brazil is one of the largest agricultural producers in the world, it has not appeared in literature in this type of analysis until now. Furthermore, it contributes to the literature on using existing techniques to investigate the impact of NTM removal on individual products in a specific country, in contrast to more recent papers that discuss using multi-country and multi-product data sets at the HTS-6 level. Thus, this paper demonstrates how a case study approach can be useful in quantifying policy changes.

Includes supplementary material for the online appendix The link between income inequality and progressive taxation has long been considered a fundamental normative foundation for income tax progressivity. This paper furnishes necessary and sufficient conditions on primitives, in terms of the elasticity of income with respect to ability, under which various subclasses of progressive taxes are inequality reducing. The distributional effects of progressive income taxation are decomposed into two conditions on the wage elasticity of income, the tax rate effect and the subsidy effect, each capturing different aspects of the transition between before-tax and after-tax income distributions. The results confer a degree of useful flexibility to the theory, in that they allow the analyst to expand the universe of consumer preferences by suitably restricting the set of marginal-rate progressive taxes. As an illustration of the results’ practical implications, we provide a precise characterization of the subclass of (progressive) taxes that are inequality reducing for the constant elasticity of substitution (CES) and the quasi-linear utility functions. This paper benefited from valuable comments made by the anonymous referees. Llavador acknowledges financial support from the Spanish Ministry of Economy and Competitiveness through the Severo Ochoa Programme for Centers of Excellence in R&D (SEV-2015-0563), the AEI/FEDER-UE (PGC2018-096370-B-100) and the AEI/FEDER-EU (ECO2017-89240-P).

We develop a model of monopolistic competition with a differentiated intermediate good and variable elasticity of technological substitution. The model allows to study the nature and origins of external increasing returns. We single out two sources of scale economies: specialization and competition. The former depends only on how total factor productivity (TFP) varies with input diversity, while the latter is fully captured by the behavior of the elasticity of substitution across inputs. This distinction gives rise to a full characterization of the rich array of competition regimes in our model. The necessary and sufficient conditions for each regime to occur are expressed in terms of the relationships between TFP and the elasticity of substitution as functions of the input diversity. Moreover, we demonstrate that, despite the folk wisdom resting on constant elasticity of substitution models, specialization economies are in general neither necessary nor sufficient for external increasing returns to emerge. This highlights the profound and nontrivial role of market competition in generating agglomeration economies and other phenomena driven by scale economies.

We investigate the optimal consumption, portfolio, and life insurance decisions problem of a liquidity constrained household whose preference is given by the CES (constant elasticity of substitution) utility function. By applying the martingale and duality method, we obtain the closed-form solution for the household’s value function and optimal strategies. We provide a rigorous proof for the optimality of the strategies. We exhibit comparative static results of the optimal decisions with respect to the elasticity of substitution between consumption and leisure.

In this article, we present a model of the electricity sector where generation technologies are intermittent. The economic value of an electricity generation technology is given by integrating its production profile with the market price of electricity. We use estimates of the consumer's intertemporal elasticity of substitution for electricity consumption while parameterizing the model empirically to numerically calculate the elasticity between renewables and fossil energy. We find that there is a non-constant elasticity of substitution between renewable and fossil energy that depends on prices and intermittency. This suggests that the efficacy and welfare effects of carbon taxes and renewable subsidies vary geographically. Subsidizing research into battery technology and tailoring policy for local energy markets can mitigate these distributional side effects while complementing traditional policies used to promote renewable energy.

Studies of childhood development have suggested human capital is accumulated in complex and nonlinear ways. Nonetheless, empirical analyses of this process often impose a linear functional form. This paper investigates which technology assumptions matter in quantitative models of human capital production. I propose a general‐to‐restricted procedure to test the production technology, placing constraints on a modified McCarthy function, from which transcendental, constant elasticity of substitution, log‐linear and linear models are obtained as special cases. Applying the procedure to data on child height from the Young Lives surveys, as well as cognitive skills, I find that the technology of human capital production is neither log‐linear nor linear‐in‐parameters; rather, past and present inputs act as complements. I recommend that maintained hypotheses underlying functional form choices should be tested on a routine basis.

This paper provides the first comprehensive review of the empirical and theoretical literature on the determinants of the elasticity of substitution between capital and labor. Our focus is on the two‐input constant elasticity of substitution (CES) production function. We start by presenting four concise observations that summarize the empirical literature on the estimation of σ. Motivated by these observations, the main part of this survey then focuses on potential determinants of capital–labor substitution. We first review several approaches to the microfoundation of production functions where the elasticity of substitution (EOS) is treated as a purely technological parameter. Second, we outline the construction of an aggregate elasticity of substitution (AES) in a multi‐sectoral framework and investigate its dependence on underlying intra‐ and inter‐sectoral substitution. Third, we discuss the influence of the institutional framework on the extent of factor substitution. Overall, this survey highlights that the effective elasticity of substitution (EES), which is typically estimated in empirical studies, is generally not an immutable deep parameter but depends on a multitude of technological, non‐technological, and institutional determinants. Based on these insights, the final section identifies a number of potential empirical and theoretical avenues for future research.

We present a modified Heckscher–Ohlin model featuring product differentiation and monopolistic competition. Consumer preferences take the constant elasticity of substitution form. Production technology has constant returns to scale. The analysis shows, that in the movement from autarky to free trade the change in the wage/rental ratio following from an increase in the number of differentiated product varieties is due to the pattern of relative substitutability between the differentiated and the homogeneous good.

This paper proposes a general solution to Solow’s original differential equation explaining the rate of change of capital-labor ratio. Determining the time path of capital-labor ratio, we obtain novel general conditions under which the capital-labor ratio can reach a stable steady-state value. Finally, we apply our findings to the Solow’s CES production function example and we demonstrate that in addition to identification of steady-state conditions, we can obtain exact time period when the economy can reach its stable steady-state capital per labor magnitude. Our results state some policy implications that can be outlined as follows. First, in economies where elasticity of substitution between capital and labor is lower than unity, the economic policies should be different than those implemented in economies where elasticity is greater than unity. Second, the main source of uncertainty in perspective of policy makers is not to determining exactly when the economy activity would reach a stable steady-state path and our findings aim to shed light on this uncertainty., Bu çalışma Robert Solow tarafından geliştirilen ve ekonomik büyüme literatürünün temeli kabul edilen sermaye büyüme modelinin geliştirilmesini amaçlanmaktadır. Çalışmamızda, Solow’un sermaye-işgücü oranındaki zamana bağlı değişimi açıklayan diferansiyel denklemine bir çözüm önerdik. Böylece, sermaye-işgücü oranının zamana bağlı fonksiyonel ifadesini elde ederek, hangi gerek koşullar altında ekonominin kararlı bir denge değerine ulaşabileceğini araştırdık. Sonuç olarak, bulgularımızı yine Solow’un sermaye ile işgücü arasında sabit ikame esnekliğini temel alarak geliştirdiği büyüme modeli örneği üzerinde uygulayarak, sonuçlarımızın geçerliliğini göstermiş olduk. Ayrıca, sonuçlarımız bir bulguya daha ulaşmamıza olanak sağlamıştır. Bu bulguyu şu şekilde özetleyebiliriz: Belirli bir başlangıç değerinden başlamak üzere, zaman içinde evrilen sermaye ve işgücü miktarlarının, kararlı bir dengenin varlığında, ne zaman bu dengeye ulaşabileceklerini elde ettik. Bu bulgularımızın bir getirisi olarak: Ekonomi politikalarının zorlu salgın süreçleri içerisinde sınandığı günümüz üretim koşullarında, politika yapıcıların uyguladıkları ekonomik reçeteler sonucunda ekonomik bileşenlerin dengeye gelip gelmemesine ek olarak, ne zaman dengenin sağlanacağını bilmelerinin hiç olmadığı kadar önem arz ettiğini değerlendiriyoruz.

In this article, we propose a new class of production functions in the new classical theory of economics and study its qualities based on Euler’s relation of quasi-homogeneous functions. In a market economy environment, it is crucial to establish a firm’s profitability and draw conclusions about the operation and to make a variety of assumptions using a function that is more consistent with reality in the future. We showed that the quasi-homogeneous function is a general form of the well known production functions such as Cobb-Douglas and Constant Elasticity of Substitution (CES). We have made some qualitative and quantitative analysis and compare our results with the classical models using statistical data of Japan.

This paper presents a flexible family which we call the $\alpha$ -mixture of survival functions. This family includes the survival mixture, failure rate mixture, models that are stochastically closer to each of these conventional mixtures, and many other models. The $\alpha$ -mixture is endowed by the stochastic order and uniquely possesses a mathematical property known in economics as the constant elasticity of substitution, which provides an interpretation for $\alpha$ . We study failure rate properties of this family and establish closures under monotone failure rates of the mixture’s components. Examples include potential applications for comparing systems.

Hightlights • This study analyzes for the first time for Spain the impact of the service offshoring on the employment of the service sector • The data drawn from the Input-Output Tables of Spain’s National Accounts • The empirical analysis is carried out by estimating a labour demand function with constant elasticity of substitution (CES), with panel data methods • The results show that the impact on employment of offshoring services by service industries is not significant and the values obtained are very small in all cases.

This paper aims to place Indonesian migrant workers based on a mapping from the estimation of the demand function of foreign workers and the efficiency of production costs. The demand function of foreign workers and the function of production costs are obtained through a derivation in the function of Constant Elasticity of Substitution (CES) production. The mapping of Indonesian migrant workers placement applies five scenarios by the assumption that local wage constantly increased using panel data from the Malaysian manufacturing industries, period 2002-2015. The result found that the relationship of all foreign workers with local workers at various levels of skills in the manufacturing industry is substitution. The priority for high-skilled which is a priority for placing Indonesian migrant workers is manufacturing industries with CA code and CI code, middle-skilled is manufacturing industries with CB code, CI code, and CJ code, low-skilled is manufacturing industries with CA code, CL code, and Other manufacturing industries.

We demonstrate that unit errors of measurement will lead to significant biases in estimating the constant elasticity of substitution (CES) function. Monte-Carlo simulations show that estimation res...

Existing studies pay little attention to when or under which conditions foreign direct investment (FDI) can spill energy-saving technologies. From a perspective of energy-biased technical change and using a two-layer nested constant elasticity of substitution (CES) production function, this paper investigates the energy-saving spillover effect of FDI on technical change (i.e., energy-saving spillovers) in China between 2002 and 2015. In particular, we consider the conditions of marketization, industry, technology, and labor mobility to examine whether and when FDI has energy-saving spillovers. The results indicate no income inequality effect, i.e., there is no evidence supporting that FDI flowing into low- and middle-income regions increases energy consumption, while FDI flowing into high-income regions conserves energy. However, there is a condition effect: FDI can improve (support the halo effect) or deteriorate (contradict the halo effect) the environmental performance under different conditions. Moreover, there is a threshold effect: the direction of FDI spillovers varies with the different levels of the threshold variables. An increasing marketization motivates enterprises to select energy-biased technologies. It is more likely to generate energy-saving spillovers in the regions with a lower specialized agglomeration level. FDI will have energy-biased spillovers when domestic technological level is relatively high with an evident energy-biased technology. In addition, a moderate labor mobility is beneficial to the energy-saving spillovers of FDI.

This paper provides a broad range of various substitution elasticity values for sectoral nested constant elasticity of substitution (CES) production functions, estimated through panel data techniques and using the World Input-Output Database (WIOD) as the main data source. Although the related empirical literature has been growing over the recent years, there is still no single study focused on a large-scale estimation of various, both product- and industry-specific, elasticities with the use of an internally consistent database and a common methodology for all the production function nests. This paper constitutes an attempt to fill this gap. The obtained estimates may subsequently be used by computable general equilibrium (CGE) modellers in their applied research – covering fiscal, labour market, trade, energy or environmental topics. Significant heterogeneity in the estimated elasticity values is observed between various industries/products as well as between various nests of the production function. This constitutes a strong argument against the arbitrary use of Leontief and/or Cobb-Douglas specifications in multi-sector CGE models.