CoPS/IMPACT Working Paper Number G-99

Title: Sato's Insight on the Relationship between the Frisch 'Parameter' and the Average Elasticity of Substitution

Authors: Alan A. Powell


This short note demonstrates that Sato's 1972 insight concerning the equivalence between Frisch's 'money flexibility' parameter and the average elasticity of substitution among commodities needs to be modified if it is to be applied to non-homothetic utility functions. Fortunately the modification is easily implemented.

JEL classification: D12

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