July 2005

IZA DP No. 1672: Exports and Labour Demand: Searching for Functional Structure in Multi-Output Multi-Skill Technologies

published in: Journal of Business and Economic Statistics, 2006, 24 (1), 91-103

In order to simplify the representation of a technological relationship between inputs and outputs, a production unit's technology must typically satisfy some restrictive conditions, some of them being well known in the literature. This paper presents new results for aggregating labour inputs and outputs, in terms of restrictions on elasticities of scale and substitution. These conditions are then empirically investigated, in a framework that is flexible and does not lose its flexibility after separability being imposed. The empirical findings of the exact approach to aggregation are found to be rather pessimistic on the possibility to provide a simplified representation.