Title: Estimate of the elasticities of substitution of the CES and translog production functions in Tunisia

Authors: Kamel Helali; Maha Kalai

Addresses: Department of Applied Quantitative Methods, Faculty of Economics and Management of Sfax, University of Sfax, Tunisia ' Department of Applied Quantitative Methods, Faculty of Economics and Management of Sfax, University of Sfax, Tunisia

Abstract: On the basis of the CES and translog production functions, this study compares the degrees of capital-labour substitution of a developing country. In order to change the tradition of some modellers, we try to present estimates of substitution elasticity caused by these two production functions applied to the Tunisian economy. In these estimations, we use statistical data about the 1961/2010 period for the five sectors of the global economy by choosing two factors of production. We apply the nonlinear least squares method to estimate the substitution elasticity in each sector of the CES function using the GAMS software and the SURE method in order to estimate the translog function by means of the STATA software. The results indicate a strong similitude between the elasticity substitution estimates for each function, which are significantly below the unity.

Keywords: nonlinear least squares; Tunisia; CES; constant elasticity of substitution; translog production functions; capital-labour substitution; developing countries; substitution elasticity.

DOI: 10.1504/IJEBR.2015.068544

International Journal of Economics and Business Research, 2015 Vol.9 No.3, pp.245 - 253

Received: 25 Feb 2014
Accepted: 22 Mar 2014
Published online: 05 Apr 2015 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article