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Factor Substitution, Import Demand, and Developmental Stages: The Evidence from Taiwan, 1961–1991 *
Author(s) -
Wang Eric C.
Publication year - 1996
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/j.1467-8381.1996.tb00159.x
Subject(s) - economics , substitution (logic) , econometrics , per capita , substitution effect , series (stratigraphy) , production (economics) , economy , macroeconomics , microeconomics , paleontology , population , demography , sociology , computer science , biology , programming language
This study examines the time variations in the Allen‐Uzawa elasticities of substitution (AUES) of Taiwan's aggregate production, emphasizing the demand for imported inputs. A three‐input ( L,K,M ) and three‐output ( C,I,X ) translog cost function is set up to estimate the AUES series in 1961–91. A regression model incorporating per capita GNP and spline time variables is used to test the variations in these series. The testing results indicate that while the AUES( L,K ) has a negative relation to income level, the AUES ( K,M ) and AUES( M,L ) have positive ones. Structural shifts in these AUES series are detected. The worldwide energy crisis in 1973–74 and industrial policy modification in 1980s are shown to have profound impacts on the economy.