On the Estimation of Factor Substitution in the Translog Model

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Abstract
The conventional approach to computation of the Allen partial elasticities of substitution in the framework of the translog production function requires estimation of a set of multivariate input-demand functions. This paper proposes an alternative way to compute the AESs, requiring only estimation of elasticities via a truncated, single cost-share equation. Value-added separability and pairwise factor substitutabilities have both been validated under the nonlinear restriction. The achievements of the alternative approach are by and large consistent with those of the conventional approach and with those in some of the existing studies.

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