elasticity of substitution
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2021 ◽  
Vol 10 (2) ◽  
pp. 114-125
Author(s):  
Pavel Potužák

The theory of interest of Irving Fisher was designed to explain positive, zero, and negative interest rate. One of the intertemporal equilibria with the zero interest is an economy with a given supply of hardtacks for shipwrecked sailors. Hardtacks can be fully saved for the future, but their stock cannot be enlarged by production. Fisher presented several streams of consumption of hardtacks over time. This paper shows that the Fisherian paths are not consistent with the dynamic optimization model. Different trajectories of the optimum consumption are calculated and sketched. Their shape depends on the value of the subjective discount rate, the intertemporal elasticity of substitution in consumption, and the lifetime horizon of the shipwrecked sailors. None of them resemble the original Fisher examples.


2021 ◽  
Vol 69 (4) ◽  
pp. 435-456
Author(s):  
Cristina Procházková Ilinitchi ◽  
Anastasie Pustovalová ◽  
David Procházka

Author(s):  
Jim Been ◽  
Kees Goudswaard

Abstract Using detailed spending and time use data from the Netherlands, this paper analyzes the causal effect of retirement on spending and time use decisions. Both total consumption and disaggregated consumption categories are considered. We do not find empirical evidence for drops in households' total non-durable spending at retirement. Our estimates suggest increases in spending at retirement on goods that are complementary to leisure, but no decreases in spending on goods that are replaceable by home production. The quantitative implication of our empirical results for the Life-Cycle Model is an intertemporal elasticity of substitution for leisure below unity.


2021 ◽  
Vol 49 (5) ◽  
pp. 754-776
Author(s):  
Mutsumi Matsumoto

This article investigates the distortionary impacts of tax base mobility and external ownership on public input provision. Regional governments compete for mobile tax bases (e.g., business capital). The impact of regional public policy partially accrues to non-residents because immobile factors (e.g., business land) are subject to external ownership. This article derives an optimal rule for regional public input provision that illustrates how these two distortionary impacts depend on the nature of production functions. The impact of external ownership is particularly complex. To explore this impact in detail, the case of production functions with constant elasticity of substitution is examined. Public inputs with different productivity impacts yield fairly different implications of external ownership for inefficient public input provision.


2021 ◽  
Vol 4 (4) ◽  
pp. 186-196
Author(s):  
Qianhui Gao

This study evaluated the impacts of food safety policies on Japan’s Simultaneous Buy and Sell rice imports through measuring tariff equivalents of food safety policies. In order to construct an estimated model, a Japanese consumer’s utility function is introduced and developed with consumer’s preference parameters and elasticity of substitution. In the empirical study part, Japan’s positive list system and rice traceability were analyzed and assessed as critical food safety policies. Results showed that after the implementation of the positive list system, consumers’ preference for foreign rice and the substitution elasticity diminished. This decreasing tendency was quite similar to the results after the enforcement of rice traceability. The tariff equivalents of food safety policies on imported rice fluctuated around ¥50 yen/kg from fiscal year 2000 to 2005 and decreased because of the global grain price hike after 2006. The tariff equivalents soared in 2010, which was induced by the traceability regulation, and then dulled during Japan’s earthquake and tsunami in 2011. Subsequently, after the recovery from natural disasters, the tariff equivalents of food safety policies became higher. Therefore, food safety policies had made imported rice less attractive, weakened the competitive power of rice exporting countries, and had statistically significant impacts on Japan’s rice importation.


2021 ◽  
Author(s):  
Jiyoung Kim ◽  
Satoshi Nakano ◽  
Kazuhiko Nishimura

Abstract This paper discusses measurement of the elasticity of substitution between goods from different countries. To remedy potential endogeneity problems in regression estimations, we use the instrumental variables (IV) approach, and the Feenstra method that does not require the use of instruments. The commodities that we study here and for which we were able to find relevant instruments are bovine, swine, and poultry meat imports by Japan. We find that the two approaches yield very similar results for these commodities. Further, upon extracting the implicit IVs of the Feenstra method, we find them as useful as the external IVs for measuring the aggregate of foreign commodities with a fixed effects regression and for estimating the foreign-domestic substitution elasticity possibly for each commodity.


2021 ◽  
Vol 3 (2) ◽  
pp. 215-232
Author(s):  
Gene M. Grossman ◽  
Elhanan Helpman ◽  
Ezra Oberfield ◽  
Thomas Sampson

We study the determinants of factor shares in a neoclassical environment with capital-skill complementarity and endogenous education. In this environment estimates of the elasticity of substitution between capital and labor that fail to account for human capital levels will be biased upward. We develop a model with overlapping generations, technology-driven neoclassical growth, and ongoing increases in educational attainment. For a class of production functions featuring capital-skill complementarity, a balanced growth path exists and is characterized by an inverse relationship between the rates of capital-and labor-augmenting technological progress and the capital share in national income. (JEL D33, E25, J24, O33)


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