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Annual Review of Economics

Volume 15, 2023

Non-CES Aggregators: A Guided Tour

Abstract

The constant-elasticity-of-substitution (CES) aggregator and its demand system are ubiquitous in business cycles theory, macroeconomic growth and development, international trade and other general equilibrium fields; this is because the CES aggregator has many knife-edge properties that help to keep the analysis tractable in the presence of many goods and factors. However, this also makes it hard to tell which properties of CES are responsible for certain results. Furthermore, it is necessary to relax some of those properties for certain applications. In this article, I review several classes of non-CES aggregators, each of which removes some properties of CES and keeps the rest to introduce some flexibility while retaining the tractability of CES as much as possible. These classes are named after the properties of CES they keep. I explain how these classes are related to each other and discuss their relative strengths and weaknesses to indicate which classes are suited for which applications.

Keyword(s): aggregators, CRS production functions, essentials, gross complements, gross substitutes, implicit additivity, inessentials, JEL C43, JEL D11, JEL D21, JEL D24, nonhomothetic preferences
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/content/journals/10.1146/annurev-economics-082322-013910
2023-09-13
2024-05-07
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/content/journals/10.1146/annurev-economics-082322-013910
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Non-CES Aggregators: A Guided Tour
Annual Review of Economics 15, 235 (2023); https://doi.org/10.1146/annurev-economics-082322-013910
/content/journals/10.1146/annurev-economics-082322-013910
/content/journals/10.1146/annurev-economics-082322-013910
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