Geoscience Reference
In-Depth Information
QX
Leo
QINT
QVA
Leo
CES
QINTD1
QINTD2
L
K
Fig. 10.2
Nested production structure
of all firms as factors of production. The CES multi-factor production function for
activity is represented as:
X
f
k
¼
1
deltax
k, a
1
rhox
a
FD
k, a
rhox
a
QX
a
¼
adx
a
ð
10
4
Þ
:
Where
QX
a
: Domestic production by activity a;
adx
a
: Shift parameter for CES production functions for QX;
deltax
f,a
: Share parameters for CES production functions for QX;
FD
f,a
: Demand for factor f by activity a;
rhox
a
: Elasticity parameter for CES production functions for QX.
The Intermediate input demand by commodity function and the domestic commo-
dity production can be denoted respectively as:
X
a
k
QINTD
c
¼
1
ioqx
c, k
QX
k
ð
10
5
Þ
:
¼
X
a
k
¼
1
ioqxcqx
c
,
k
COMOUT
c
¼
QX
k
ð
10
6
Þ
:
Where
QINTD
c
: Demand for intermediate inputs by commodity;
COMOUT
c
: Domestic commodity production;
ioqx
c,k
: Use matrix coefficients;
ioqxcqx:
a,c
: Share of commodity c in output by activity a.
Transportation services provided by transportation sectors are treated as
intermediates in non-transportation sectors through the Leontief technology func-
tion. The value is added to the final product together with inputs from the CES
production function. In transportation sectors of truck, air, transit and water, the
factor inputs of the CES production function includes labor, private and public
capital. The public transportation capital accounts are set to zero for the
non-transportation sectors and for the two private transportation sectors rail and
pipeline. The elasticities of factor substitution are assumed consistent for all factors
substitution. It is exogenously estimated through both ordinary least squares (OLS)
regression model and spatial econometric model.
