Factor Substitution In Linear Programming: A Methodology And An Application To Cane Alcohol Pricing Policies In Costa Rica

Factor substitution in linear programming:
a methodology and an application to cane alcohol pricing policies in Costa Rica
Rafael Celis

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DISSERTATION Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Economics
The University of New Mexico
Alburquerque, New Mexico
December, 1989


FACTOR SUBSTITUTION IN LINEAR PROGRAMMING:
AMETHODOLOGY AND AN APPLICATION TO CANE ALCOHOL
PRICING POLICIES IN COSTA RICA


By
RAFAEL CELIS
Licenciado Economia, Universidad de Costa kRca, 1980
M.A., The University of New Mexico, 1984


DISSERTATION Submitted in Partial Fulfillment of the Requirements for Lhe Degree of
Doctor of Philosophy in Economics


The University of New Mexico Albuquerque, New Mexico December, 1989C

Copyright by Rafael Celis, 1989

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Dedicated to
my Parents, Rafael and Beatriz,
my Wife, Ana,
my Children, Juan Rafael, Gerardo, and Ana Beatriz


iv


ACKNOWLEDGMENTS


I wish to thank institutions and persons who have supported me.
The Universidad de Costa Rica and the Consejo Nacional de Investiga­ ciones Cientfficas y Tecnoldgicas awarded me
thescholarship to pursue
graduate studies.
The funds for this scholarship came from the people
of Costa Rica and from the people of the United States, the latter
through the USAID.
My special thanks to Mario Vedova, who was
instrumental in maintaining the flow of monetary and other logistic
support from Costa Rica.
Foremost is Roger Norton, my friend and mentor.
He guided my
graduateeducation with incomparable grace and led my scientific
curiosity to the highest aims.
Even after he left the University of
New Mexico, Roger spared many hours of his precious time in Albuquerque
and in various other places where we
coincided in our working trips.
When Roger left the University, Shaul Ben-David took over the chairman­ ship of my dissertation committee providing criticalsupport in th.
final stages of its preparation. Ronald Cummings, also a member of the


committee, offered insightful comments
that were useful In the final
shape of this document.


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At the International Food Policy Research Institute (IFPRI), from
where I finished this piece of research, I wish to thank John Mellor
for his encouragement and support.
Thanks also to JorgeWong-Valle who
assisted me and to Gaudencio Dizon who diligently typed the-various
versions of this document.
Thanks, finally, to my wife and children for their patience and
for their nightly and faithful prayers.


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FACTOR SUBSTITUTION IN LINEAR PROGRAMMING:
A METHODOLOGY AND AN APPLICATION TO CANE ALCOHOL
PRICING POLICIES IN COSTA RICA


By
RAFAEL CELIS


ABSTRACTOF DISSERTATION
Submitted in Partial Fulfillment of the Requirements for the Degree of
Doctor of Philosophy in Economics


The University of New Mexico

Albuquerque, New Mexico
December, 1989


FACTOR SUBSTITUTION IN LINEAR PROGRAMMING:
A METHODOLOGY AND AN APPLICATION TO CANE ALCOHOL PRICING POLICIES IN COSTA RICA

RAFAEL CELLS

Licenciado Economia, Universidad de Costa Rica,1980
M.A. Economics, The University of New Mexico, 1984
Ph.D. Economics, The University of New Mexico, 1989


The main methodological contribution of this study is the develop­ ment of a technique to link activity analysis and neoclassical produc­ tion functions, in the context of constrained optimization models.
The
technique has two major components. First, a procedure was developedto incorporate the isoquants into a linear programming model.
Second,

there is
an algorithm to generate numerical isoquants that requires


only information on the elasticity of factor substitution, the input
ratio and input prices ob3erved at a single point on the hypothetical
isoquant.
Among the types of applied research that this marriage
between activity analysis...