On the dependence of the growth rate on the elasticity of substitution in a network
by Yury P. Martemyanov; Vladimir D. Matveenko
International Journal of Process Management and Benchmarking (IJPMB), Vol. 4, No. 4, 2014

Abstract: We consider the dependence of the growth rate on the elasticity of substitution within the framework of a model with the agents' mutual dependence. This model is interpreted as a network structure. The development is explained as the agents' increase in values in the dynamic system described by functions which display constant elasticity of substitution (CES). We investigate the cases of high and low complementarity of activities. In particular, we receive conditions allowing to identify the cases when the elasticity of substitution has a positive (negative) effect on the growth rate under high (low) complementarity of activities. Additionally, we analyse the influence of the individual agents' productivity on the growth rate. Finally, we give a potential generalisation of the model allowing for different growth rates of the agents.

Online publication date: Fri, 31-Oct-2014

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