Title: A note on impact of new economic reforms on the elasticity of substitution in Indian industries: alternative measures

Authors: Bhupendra V. Singh, Akhilesh K. Sharma

Addresses: Department of Economics, Banaras Hindu University, Varanasi (UP) – 221005, India. ' Department of Economics, Banaras Hindu University, Varanasi (UP) – 221005, India

Abstract: The year 1991 is the year of U-turn for economic policies in India. The process of new economic reforms, started in full sway in this year, has affected significantly, more or less, every sector of the economy. The present paper tries to find out changing substitutability amidst capital and labour in Indian industries as whole over pre- and post-reform periods. For this, three alternative models of VES production function have been chosen for estimation. The impact of reforms is captured by using separate datasets for pre- and post-reform period and also by using dummies. The elasticity of substitution obtained for all three VES production functions, for each pre- and post-reform periods, gives the similar trends, though their magnitudes are different. The elasticity of substitution in post-reform period is although, more than that of pre-reform period, the trend is decreasing.

Keywords: elasticity of substitution; capital-labour ratio; pre-reform; post-reform; India; new economic reforms; economic policy.

DOI: 10.1504/IJCEE.2009.029259

International Journal of Computational Economics and Econometrics, 2009 Vol.1 No.2, pp.210 - 224

Available online: 17 Nov 2009 *

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