Factor Demand and Substitution in Mineral-Intensive Industries

Abstract

This paper presents a model of the demand for reproducible capital, labor, and nonfuel mineral resources in six manufacturing industries that process exhaustible mineral resources. Partial substitution elasticities are estimated from translog unit cost functions and factor demand equations. These estimates are then used to simulate input demands in a setting of exhaustible resources scarcity. The principal finding is that substitution possibilities are much more limited than those implied by Cobb-Douglas production technology, and this has important implications for the possible conservation of exhaustible resources.