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Mitigating the Effects of Multicollinearity Using Exact and Stochastic Restrictions: The Case of an Aggregate Agricultural Production Function in Thailand

Author

Listed:
  • Ron C. Mittelhammer
  • Douglas L. Young
  • Damrongsak Tasanasanta
  • John T. Donnelly

Abstract

Ordinary least squares, exactly restricted OLS, stochastically restricted OLS (mixed estimation), and principal components regression each were used to estimate an aggregate agricultural production function for Thailand for which data were highly multicollinear. Pretest considerations, incorporating alternative risk measures, were addressed in detail for purposes of model evaluation. The final mixed and principal components models generally outperformed OLS in terms of risk and overall reasonableness, mitigating a serious multicollinearity problem and permitting a direct examination of the rate and composition of Thai agricultural output growth.

Suggested Citation

  • Ron C. Mittelhammer & Douglas L. Young & Damrongsak Tasanasanta & John T. Donnelly, 1980. "Mitigating the Effects of Multicollinearity Using Exact and Stochastic Restrictions: The Case of an Aggregate Agricultural Production Function in Thailand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(2), pages 199-210.
    • Handle: RePEc:oup:ajagec:v:62:y:1980:i:2:p:199-210.
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    File URL: http://hdl.handle.net/10.2307/1239685
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    Citations

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    Cited by:

    1. Trueblood, Michael Alan, 1991. "Agricultural Production Functions Estimated From Aggregate Intercountry Observations: A Selected Survey," Staff Reports 278560, United States Department of Agriculture, Economic Research Service.
    2. Mittlehammer, Ron C., 1983. "Mixed Estimation: A New Perspective," 1983 Annual Meeting, July 31-August 3, West Lafayette, Indiana 279112, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Mundlak, Yair, 2001. "Production and supply," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 1, pages 3-85, Elsevier.
    4. Semprevio, Ralph R. & Capps, Oral Jr., 1981. "Detection And Treatment Of Multicollinearity In Simultaneous Systems Of Equations," 1981 Annual Meeting, July 26-29, Clemson, South Carolina 279383, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Mittelhammer, Ron C. & Conway, Roger K., 1986. "A Contribution to the Rehabilitation of Mixed Estimation," 1986 Annual Meeting, July 27-30, Reno, Nevada 278120, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Mundlak, Yair, 1999. "Production and Supply (Revised)," Working Papers 232819, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    7. Parandvash, G. Hossein, 1988. "Incorporation Of Nonnumeric Information Into The Estimation Of Economic Models: A New Approach For Dealing With Multicollinearity," 1988 Annual Meeting, August 1-3, Knoxville, Tennessee 270201, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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