Curvature and the elasticity of substitution: Straightening it out |
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Authors: | Olivier de La Grandville |
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Affiliation: | (1) Present address: Department of Economics, University of Geneva, 102 boulevard Carl-Vogt, CH-1211 Geneva 4, Switzerland |
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Abstract: | This paper demonstrates that, contrary to deeply rooted beliefs, there is no link between curvature and the elasticity of substitution. We show that there is no direct, nor inverse, relationship between the two concepts, if curvature of the isoquant is defined either in its strict mathematical sense or as the isoquant's second derivative. We finally suggest to view the elasticity of substitution as an efficiency parameter. |
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Keywords: | curvature elasticity of substitution efficiency |
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