Firm and industry elasticities of substitution: The two factor case

Summary For the industry composed of single output, two factor firms, industry elasticity of demand for one of the factors with respect to the price of the other is negative or positive as the elasticity of demand for industry output is greater or less thanindustry elasticity of substitution between the factors. Using isoclines, vectors, isoquants, and isoscales, it is shown that, where firm isoquants are non-homothetic, industry elasticity of substitution for constantindustry output allows for adjustment of the level of firm output, and thus exceeds firm elasticity of substitution for constantfirm output.He wishes to thank two anonymous referees for helpful suggestions.     

Distribution,taxation and employment in an open economy

Summary If taxes on labour income are passed on in wages the balanced budget multiplier may be negative. The present paper analyses this problem from a theoretical point of view applying a linearized version of a model for the small open economy. The model is dynamic, because account is taken of capital accumulation. Short-run and long-run solutions are expressed in terms of fiscal policy variables, a wage push variable, the price level abroad and world demand. Numerical examples are supplemented to illustrate the analytical results. Acknowledgement is due for his helpful comment to S.K. Kuipers