The most striking example of this "averaging out" result is the relationship between the production factors energy and capital: In the low energy-use subset, we find substitutability between the factors energy and capital at the 1% level of significance, and in the high energy-use subset complementarity at the 10% level.
Specifically, we compare the degree of substitutability between the input factors capital, labor, energy, and material for firms with low, medium, and high energy cost shares using a panel of Swiss manufacturing companies covering the period from 1997 to 2008.
We stress three main results: First, we find evidence for substitutability between energy and the input factors capital and labor for firms with low-energy intensity, implying that upon an energy price increase, factor use of labor and capital will increase in order to optimally compensate for the decreasing energy use.
Thus, QE's impact on its trading partners may be positive or negative; it depends on a country's trade intensity, the substitutability between its and its competitors' products, and how sensitive domestic demand is to lower rates.
I think the really fascinating dynamic in this book is the substitutability between labour and capital, something Mr Piketty mentions but does not devote an especially long amount of time to.
For example, complementarity between low‐skill immigrants and high‐skill natives may induce the creation of more standard high‐skill jobs; on the other hand, substitutability between immigrants and low‐skill natives may displace the latter out of nonstandard employment.
What about the substitutability between mobile and non-mobile Internet advertising?
The less substitutability between labor and other inputs, the smaller the profit-maximizing distortion in the input ratio, and the smaller the reduction in the output specified in the contract for the low-ability agent.
Existing studies show mixed evidence about the substitutability between elderly workers and younger workers.
The positive sign indicates complementarity and the negative sign shows substitutability between technologies.
