Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86535
Authors: 
Broer, Peter
Year of Publication: 
2004
Series/Report no.: 
Tinbergen Institute Discussion Paper 04-101/1
Abstract: 
This paper argues that the conventional definition of the elasticity of complementarity is not well suited to deal with the case of increasing returns. It proposes a slightly different formula, that uses a distance function formulation instead of a production function. The proposed definition coincides with the Hicksian measure in case the production function displays constant returns. It is more informative in case returns to scale are not constant, as it disentangles entry effects and substitution effects of factor supplies. The new definition is also preferable in that it is fully symmetric with the definition of the elasticity of substitution.
Subjects: 
distance function
elasticity of complementarity
returns to scale
tangency condition
JEL: 
D21
D43
L16
Document Type: 
Working Paper

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