CoPS/IMPACT Working Paper Number G-99

Title: Sato's Insight on the Relationship between the Frisch 'Parameter' and the Average Elasticity of Substitution

Authors: Alan A. Powell

Abstract

This short note demonstrates that Sato's 1972 insight concerning the equivalence between Frisch's 'money flexibility' parameter and the average elasticity of substitution among commodities needs to be modified if it is to be applied to non-homothetic utility functions. Fortunately the modification is easily implemented.

JEL classification: D12

Working Paper Number G-99 can be downloaded in PDF format. To print this you will need the Adobe Acrobat Reader.


Go to working papers page