ESG complementarities in the US economy

Aliya Kenjegalieva, Meryem Duygun, Amangeldi Kenjegaliev, Stephe Hall

Research output: Contribution to journalArticlepeer-review

2 Citations (SciVal)


This paper investigates ESG from the perspective of changes in input elasticities of substitution and complementarity. Rather than compute these elasticities from the cost function, we compute them from the Input Distance Function (IDF). Our data are from Refinitiv Eikon Datastream database. We focus on the US economy due to her global role in the world economy and hence spillover effects of uncertainties on the rest of the world. The data consist of 5,798 companies comprising 38 US industries that span for 12 years from 2009 to 2020 and include: (i) financial data on sales, capital and employees; (ii) two financial ratios and (iii) three main ESG indicators. We compute Antonelli Elasticity of Complementarity (AEC) and Allen-Uzawa Elasticity of Substitution (AES) from the translog of IDF function. We find that the standard inputs have positive AEC elasticities; however, ESG cross-elasticities exhibit negative signs, classifying them as q-substitutes. Therefore, an increase in one of the ESG values leads to a decrease in the marginal value of the other. On the other hand, AES elasticities have a negative sign only for the Governance-Environment “doublet'; the rest of the pairs are positive implying that they are p-complements.
Original languageEnglish
JournalThe European Journal of Finance
Publication statusPublished - 28 Dec 2022


  • ESG
  • US economy
  • complementarity/substitution
  • input distance function

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)


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