Abstract:

This paper examines the role of imports as an alternative input to domestically supplied capital and labor in the U. S. economy for the period 1970-1993. We use the aggregate translog cost function, which permits us to obtain econometric measures of the pair-wise elasticities of substitution between inputs for each year, the annual own- and cross-price elasticities of demand for inputs. Our results imply conventionally downward sloping demand curves for inputs but they are inelastic. The demand for labor is most inelastic, followed by imports and capital, respectively. Regression results also show that inputs are gross substitutes, the partial elasticity of substitution between capital and imports is higher than the partial elasticity of substitution between labor and imports

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