Substituting for water inputs in U.S. manufacturing

Partial elasticities of substitution among capital, labor, and water provide empirical evidence concerning the possibilities of adjusting the techniques of manufacturing to accommodate changing scarcities of water. Empirical estimates of elasticities for the United States are obtained by using a trans‐log cost function with SIC two‐digit manufacturing data for 1973. Results show that water and labor inputs are good substitutes but that water and capital are complements. Economic implications of this finding are discussed.