Implicit Elasticities and Price Effects: An Updated Procedure

Abstract

Based on the general procedure described by Casler [(2011) Coefficient Change, Price Effects, and Implicit Elasticities: Estimating Microeconomic Determinants over Two Time Periods. Economic Systems Research, 23, 153-174], this paper presents an updated approach to the estimation of input coefficient changes as functions of changing prices. The procedure makes direct use of relationships that emerge from the model of cost minimization subject to producing a desired level of output. Based on an initial specification of constant cross-price derivatives, the imposition of adding up and symmetry conditions allows the actual price and coefficient changes that occur between periods to identify implicit own and cross-price derivatives and corresponding elasticities, using data for only two time periods. With this updated approach, the calculation of derivatives is far simpler and leads to far more accurate measures of price-induced input-output coefficient changes than the original version.

Prices and Inflation in Global Value Chains : A global inflation-to-output price elasticity database with applications

“…His concept of income and production elasticities of prices is related to our output price-to-output price elasticities; however, it is different from our approach. The case is the same with Casler's (2011Casler's ( , 2013 As 0  = pi , we have the new index prices minus 1 on the left side, which are the relative changes in prices in a decimal form. To have them in percentages, which is common when working with elasticities, simply multiply both sides by 100.…”

“…https://www.worldbank.org/en/research/commodity-markets 2 https://data.oecd.org/price/inflation-cpi.htm 3 https://ec.europa.eu/eurostat/web/main/data/database 4 IO price model-based or price-related papers(Abildgren, 2007;Bazzazan and Batey, 2003;Cabrer et al, 1998;Casler, 2011Casler, , 2013Durand and Rioux, 1994;Folloni and Miglierina, 1994;Karasz, 1992;Kratena, 2005;Kuboniwa, 1993;Llop, 2021;Mattey, 1993;Seton, 1993) form the minority also in the leading journal of the field.…”