Substitution Elasticities between Durable and Nondurable Goods in the United States: New Evidence from the Dynamic Laurent System

EMPIRICAL ECONOMICS, Vol 22 No 1, March 7, 1997

Posted: 5 Mar 1997

See all articles by Adrian R. Fleissig

Adrian R. Fleissig

California State University, Fullerton - Department of Economics

Abstract

This paper uses the dynamic Laurent demand system to jointly estimate the service flows from durable and nondurable goods. The parameter estimates are used to obtain the Morishima elasticity of substitution between goods for the United States from 1960:1 to 1991:4. One of the significant results of this study is that the Morishima elasticities of substitution vary over time instead of being constant. This result implies that the use of the CES functional form gives a poor approximation of the demand system for the data used in this paper. Another important result is that consumers adjust to their long-run equilibrium holding of consumption goods slowly rather than quickly.

JEL Classification: C32, E20

Suggested Citation

Fleissig, Adrian R., Substitution Elasticities between Durable and Nondurable Goods in the United States: New Evidence from the Dynamic Laurent System. EMPIRICAL ECONOMICS, Vol 22 No 1, March 7, 1997. Available at SSRN: https://ssrn.com/abstract=3771

Adrian R. Fleissig (Contact Author)

California State University, Fullerton - Department of Economics ( email )

Fullerton, CA 92834
United States

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