Substitution among Capital, Labor, and Natural Resource Products in American Manufacturing

This paper presents estimates of partial elasticities of substitution among reproducible capital, labor, and an input aggregate of natural resource products. We are specifically interested in two hypotheses: (i) Are natural resource products strictly complementary in production with either capital or labor? (ii) Are resource products typically less substitutable with capital than with labor? To both questions the answer is, generally, no. Two modes of investigation are used, one based on a translog production function and the other making use of a translog cost function. For most industry groups, the estimated substitution elasticities obtained from the cost function are somewhat lower than those based on the translog production function.

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