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This study addresses the scarcity of empirical estimates on the elasticity of production factor substitutions, a crucial parameter in general equilibrium models for policy analysis. Employing the non-linear least squares estimation method, we determine the elasticity of substitution between capital, labor, energy, and materials in the Constant Elasticity of Substitution model across Europe at both aggregate and sectoral levels. Through rigorous analysis, we identify the optimal nesting structure of the production function for our data, rejecting widely used CES functional forms such as Cobb-Douglas and Leontief. Our findings reveal changes in elasticity of substitution over time, with Eastern Europe exhibiting greater ease of substitution compared to Western Europe, particularly between capital and labor. While elasticities in tertiary sectors diverge over time, those in energy-intensive sectors converge, though they remain statistically different, underscoring the necessity of region-specific elasticity sets in CGE models. JEL Classification: C51, Model Construction and Estimation; D24, Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

1. The biodiversity-productivity relationship (BPR) constitutes one of the most fundamental yet challenging topics in ecology. Most described BPRs so far are based on relatively small grain sizes (typically smaller than lha), and understanding how sion critical for biodiversity conservation and forest management, still remains elusive. 2. Based on a unique 54.12-ha large-scale forest observational site in Northeastern China, where we georeferenced and measured approx. 90,000 trees in two consecutive inventories, we studied BPRs across a cascade of spatial scales using geostatistical analysis and bootstrapping. To explore the underlying mechanisms of the scale dependency of BPR, we further investigated the scale gradient in biodiversity and productivity, respectively, and assessed neighbourhood influences on individual trees. 3. Across all the spatial scales, we found a consistent positive concave-down effect of tree species richness on forest productivity. The elasticity of substitution (θ) represented the degree to which species can substitute for each other in contributing to forest productivity. At the community level, the curvature of BPRs in terms of the elasticity of substitution (θ) declined from around 0.50 and converged at around 0.15, as the grain size increased from 0.01 to 1.00 ha, all else being equal. Similarly, at the individual tree level, neighbourhood diversity coefficient, a linear proxy of , declined from around 0.08 and converged at around 0.03, as neighbourhood size increased from 0.01 to 1.00 ha, all else being equal. 4. Synthesis. Our study found a pronounced scale dependency of biodiversity-pro- ductivity relationship and quantified, for the first time, how biodiversity-productivity relationship scale up from 0.01 to 1.00 ha. Our findings suggest that biodiversity-ecosystem functioning relationship can be generally scale-dependent and, hence, one must factor in this effect in biodiversity conservation and ecological restoration projects. Our findings also indicate that biodiversity-productivity relationship, predominantly determined by biological processes (i.e. the BPRs scale up from individual trees to communities of different sizes, a mis-complementarity and diminishing marginal productivity) at a small scale, can be increasingly influenced by statistical (i.e. spatial central limit theorem) and other (such as species-area relationship) processes as the scale increases.

We consider two life cycle models of labor supply that use nonconvexities to generate retirement. In each case we derive a link between hours worked prior to retirement, the intertemporal elasticity of substitution for labor (IES), and the size of the nonconvexities. This link is robust to allowing for credit constraints and human capital accumulation by younger workers and suggests values for the IES that are .75 or higher. (JEL D91, J22, J24, J26)

We develop a framework to estimate the aggregate capital-labor elasticity of substitution by aggregating the actions of individual plants. The aggregate elasticity reflects substitution within plants and reallocation across plants; the extent of heterogeneity in capital intensities determines their relative importance. We use micro data on the cross-section of plants to build up to the aggregate elasticity at a point in time. Interpreting our econometric estimates through the lens of several different models, we find that the aggregate elasticity for the U. S. manufacturing sector is in the range of 0.5–0.7, and has declined slightly since 1970. We use our estimates to measure the bias of technical change and assess the decline in labor’s share of income in the U.S. manufacturing sector. Mechanisms that rely on changes in the relative supply of factors, such as an acceleration of capital accumulation, cannot account for the decline.

Foreign aid flows to poor, aid-dependent economies are highly volatile and pro-cyclical. Shortfalls in aid coincide with shortfalls in GDP and government revenues. This increases the consumption volatility in aid dependent countries, thereby causing substantial welfare losses. This paper finds that indexing aid flows to exogenous shocks like a change in the terms of trade can significantly improve the welfare of aid-dependent country by lowering its output and consumption volatility. Compared to the benchmark specification with stochastic aid flows, indexation of aid flows to terms of trade shocks can reduce the cost of business cycle fluctuations in the recipient country by four percent of permanent consumption. Moreover, use of indexed aid can allow donors to reduce the aid flows by three percent without lowering the level of welfare in the recipient country.

Manufacturing is an important sector of the Indian economy and a significant contributor to the nation’s economic growth and development. This growth is heavily dependent on energy consumption, which has important implications for both economic and environmental sustainability. The study utilizes twenty years of dynamic panel data from Annual Survey of Industry (ASI). The study examines substitutability among labor, capital, and energy using the trans log production function. Ridge regression is used via penalization, such as the penalty parameter (λ), to address the problem of multicollinearity among input variables. Along with that GMM method used to address endogeneity which is persistent in dynamic panel data. The study finds that output elasticity for capital, labor, and energy is positive and increasing returns to scale, indicating output increases more than proportionally in Indian manufacturing industries. Capital is the highest contributor, followed by labour then energy. The elasticity of substitution between capital and labour is positive and very high, indicating the inputs are very easily substituted. The elasticity between capital-energy and labour-energy, on the other hand, is negative, indicating these inputs are complementary, meaning more capital use increases energy consumption, similarly more labour employment raises energy as well. These results show possible solutions for industries to improve output when they face problems like growing energy costs or a lack of workers. They also help policymakers who want to modernize industries and make them more energy efficient.

\"This paper calculates the effects of immigration on the wages of native US workers of various skill levels in two steps. In the first step we use labor demand functions to estimate the elasticity of substitution across different groups of workers. Second, we use the underlying production structure and the estimated elasticities to calculate the total wage effects of immigration in the long run. We emphasize that a production function framework is needed to combine own-group effects with cross-group effects in order to obtain the total wage effects for each native group. In order to obtain a parsimonious representation of elasticities that can be estimated with available data, we adopt alternative nested-CES models and let the data select the preferred specification. New to this paper is the estimate of the substitutability between natives and immigrants of similar education and experience levels. In the data-preferred model, there is a small but significant degree of imperfect substitutability between natives and immigrants which, when combined with the other estimated elasticities, implies that in the period from 1990 to 2006 immigration had a small effect on the wages of native workers with no high school degree (between 0.6% and +1.7%). It also had a small positive effect on average native wages (+0.6%) and a substantial negative effect (-6.7%) on wages of previous immigrants in the long run.\" (Author's abstract, IAB-Doku). Die Untersuchung enthält quantitative Daten. Forschungsmethode: empirisch-quantitativ; empirisch; Längsschnitt. Die Untersuchung bezieht sich auf den Zeitraum 1990 bis 2006.

The study analyses the influence of technical barriers to agricultural trade carried out by Japan on China’s fruit exports. In order to measure the tariff equivalents of technical barriers, the price wedge method is utilized. Based on the utility function specified in the study, the constructed model is adopted to evaluate the elasticity of substitution between the imported fruits and Japanese domestic fruits, and the consumers’ preference parameters for different kinds of fruits. Sample data are chosen from the beginning of 2002 to the end of 2015. Based on the estimated preference parameters and elasticity of substitution, the results show that Japanese consumers prefer domestic fruits to the imported fruits. Besides, the results reveal that although the substitution and preference parameters are higher for the improved quality of imported fruits in the context of the positive list system, the scales of tariff equivalents of technical barriers are larger than the regular custom tariffs, and the technical barriers would cause extra huge costs for the imported fruits. Especially, in the three consecutive years after the implementation of the positive list system, tariff equivalents of technical barriers almost reached 150%, and then gradually decreased in the following years.

How can limited energy resources ensure a continuous development of the Chinese economy? In the study, we have employed the 1995–2014 data of China’s 29 provinces (Autonomous Regions and Municipalities) for an energy intensity analysis in the three approaches of panel regression, Morishima elasticity of substitution, and decomposition of energy intensity. The study finds first of all that the prices of China’s energy and capital are distorted because of excessive intervention by the government at all levels. The seriously distorted prices have prevented energy from being effectively replaced by labor and capital inputs in most regions, and the distortion of energy prices was much more serious than that of labor and capital; second, technological changes, scale, and pure efficiency have played a weak role in energy intensity reduction, and the increasing energy supply constraints for each region have had no significant effect on the decline of energy intensity; third, the effects of factor substitution on energy intensity reduction have remained more evident in the Bohai Rim, Northeast, Central, Southwest and Northwest of China, while the industrial share has played a crucial role in the decline of energy intensity of the Yangtze River Delta and the Southeast coastal areas. These findings imply that the Chinese authorities are expect to revise its price generation mechanism for factor inputs, develop targeted energy-efficient technology, and enable technical progress to become the major driver of China’s economic growth.

We provide a general theoretical characterization of how firms’ technology choice on a technology frontier determines the long-run elasticity of substitution between capital and labour. We show that the shape of the frontier determines factor shares and the elasticity of substitution between capital and labour. If there are adjustment costs to technology choice, the short- and long-run elasticities differ, with the long-run always higher. If the technology frontier is log-linear, the production function becomes Cobb–Douglas in the long run but, consistent with empirical evidence, short-run dynamics are characterized by gross complementarity. The approach is easily implementable and yields a powerful way to introduce CES-type production functions in macroeconomic models. We provide an illustration within an estimated dynamic general equilibrium model and show that the use of our production technology provides a good match for the short- and medium-run behaviour of the U.S. labour share.