Curvature conditions and substitution pattern among capital, energy, materials and heterogeneous labour

Abstract

This study deals with the determinants of factor demand in 27 industries of the manufacturing sector during the period 1978 to 1990. Using a quadratic cost function, six production factors are distinguished : capital, energy, three types of labour and intermediate materials. A parametric test of the concavity of the cost function in prices is provided and price elasticities are compared when curvature conditions are imposed or not. The result show, firstly, that in general estimates do not appear very sensitive to imposing theoretical restrictions implied by optimising behaviour. Secondly, demand for unskilled and medium skilled labour than any other pairs of inputs. --curvature conditions,elasticities of substitution,skill structure