Substitution and price elasticity estimates using inter-country pooled data in a translog cost model
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Substitution and price elasticity estimates using inter-country pooled data in a translog cost model

  • Author(s): Roy, Joyashree
  • Sanstad, Alan H.
  • Sathaye, Jayant A.
  • Khaddaria, Raman
  • et al.
Abstract

Pooled data across several developing countries and the U. S. were used to estimate long-run substitution and price elasticities in a translog framework for the paper, iron and steel, and aggregate manufacturing industries. While the quality of the estimates varies across the several industry-specific models, the results suggest higher values for these elasticities than appear commonly used in integrated assessment models. Estimates of own-price elasticities of energy range from - 0.80 to - 1.76 and are comparable to estimates from previous econometric studies in the context of developed countries (- 0.77 to - 0.87). Substitution elasticities show wider variation across countries and industries. For energy and capital they range from -1.96 to 9.80, for labor and energy from 2.61 to 7.11, and for energy and material from - 0.26 to 2.07.

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