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Abstract
The purpose of this paper is to illustrate the value of the Constant Difference Elasticity (CDE) functional form in applied general equilibrium analysis. It is a natural generalization of the commonly used CES form which permits the researcher to calibrate preferences to complete vectors of own-price and income elasticities. Similarly revenue and cost functions may be calibrated to appropriate vectors of compensated own-price elasticities of supply and demand. Because the CDE is an implicit functional form, its incorporation into a CGE model requires some additional steps. These are discussed and a tworegion, three good illustration is provided.