An input is inferior if and only if an increase in its price raises all marginal productivities. A sufficient condition for input inferiority under quasi-concavity of the production function is then that there are increasingmarginal returnswith respect to the other input and a non-positive marginal productivity cross derivative. Thus, contrary to widespread opinion, input “competitiveness” is not needed. We discuss these facts and illustrate them by introducing a class of simple production function functional forms. Our results suggest that the existence of inferior inputs is naturally associated with increasing returns, and possibly strengthen the case for inferiority considerably.
On inferior inputs and marginal returns
BERTOLETTI, PAOLO
;RAMPA, GIORGIO
2013-01-01
Abstract
An input is inferior if and only if an increase in its price raises all marginal productivities. A sufficient condition for input inferiority under quasi-concavity of the production function is then that there are increasingmarginal returnswith respect to the other input and a non-positive marginal productivity cross derivative. Thus, contrary to widespread opinion, input “competitiveness” is not needed. We discuss these facts and illustrate them by introducing a class of simple production function functional forms. Our results suggest that the existence of inferior inputs is naturally associated with increasing returns, and possibly strengthen the case for inferiority considerably.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
