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Factor substitutability: Another view

Authors
Journal
Applied Mathematical Modelling
0307-904X
Publisher
Elsevier
Publication Date
Volume
5
Issue
4
Identifiers
DOI: 10.1016/s0307-904x(81)80068-6

Abstract

This paper looks at the issue of factor substitutability versus complementarity from the point of view of directional causality. That is, prior to estimating a production function, is there any empirical support for the belief that capital, labour, energy and materials are substitutes or complements for one another in the production process? The results suggest that capital is a substitute for the other factors of production but when the other factors are compared pairwise, such a conclusion does not follow.

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