On Factors Substitutability and the Production Possibility Frontier in Multi-sectoral Economies.

This contribution raises the importance of factors substitutability in multi-sectoral economies. The argument is developed within a basic environment with two goods and two inputs and is based upon a close articulation between the features of the frontier of the production possibility set and the underlying sectoral production technologies. This brings up a direct articulation between the aggregate elasticity of substitution between the two outputs, the aggregate elasticity of substitution between the two inputs and the sectoral elasticities of substitution between the two inputs.