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Separability and Aggregation

Jan R. Magnus and Alan D. Woodland
Economica
New Series, Vol. 57, No. 226 (May, 1990), pp. 239-247
DOI: 10.2307/2554162
Stable URL: http://www.jstor.org/stable/2554162
Page Count: 9
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Separability and Aggregation
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Abstract

The paper examines the conditions for homothetic separability of a technology which is an aggregate of technologies of individual firms or industries. Given that the primitive (industry or firm) technologies exhibit homothetic separability, we establish necessary and sufficient conditions for the aggregate (sectoral) technology to also exhibit homothetic separability. These conditions are expressed in terms of the cost functions of the primitive technologies. They may then be utilized to obtain an econometric test for separability of the aggregate technology, using data only on the primitive technologies.

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