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Alberto Behar
''Marshall`s Rules with Aggregate Inputs''
( 2011, Vol. 31 No.1 )
We establish the formal link between the separability of inputs in a production function and the aggregate elasticity of demand for those inputs. This validates the implicit assumption used when calculating an aggregate elasticity with aggregated input prices and provides a practical approach to calculating an aggregate elasticity when one has disaggregated prices. We illustrate the approach to add to a thin empirical literature on labor demand elasticities in developing countries by using South African data.
Keywords: Elasticity of substitution, labor demand, separability
JEL: J2 - Demand and Supply of Labor: General
J3 - Wages, Compensation, and Labor Costs: General
Manuscript Received : Mar 01 2011 Manuscript Accepted : Mar 14 2011

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