Capital-labor substitution and economic efficiency

Arrow, K. J., Chenery, Minhas, & Solow, R. M. (1961). Capital-labor substitution and economic efficiency. Review of Economics and Statistics, 43(3), 225-250.

Type

Journal article

Intellectual base

Review or monograph

Year

1961

Volume

43

Issue

3

Pages

225-250

DOI registrant

registered by a platform that did not publish the work; the publisher is not recorded

Link

https://doi.org/10.2307/1927286verified

Cited from

systems_cybernetics

Cited by

1 citation across 1 artifact.

Each citation links to the sentence it supports in the citing article.

Primes

• Substitutability
  • The tradeoff is not fixed; designers choose where on the spectrum to operate based on requirements—a tradeoff Arrow, Chenery, Minhas, and Solow (1961) made quantitative through the elasticity of substitution parameter, which formally measures how readily one input can replace another along a production frontier as relative prices change.

    This sourceIntroduces the constant elasticity of substitution (CES) production function; formalizes the flexibility-optimality tradeoff through a single parameter quantifying the ease with which one input can be substituted for another along an isoquant.

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