Advanced Search
MyIDEAS: Login

Econometric Estimation of the “Constant Elasticity of Substitution" Function in R: Package micEconCES

Contents:

Author Info

  • Arne Henningsen

    ()
    (Institute of Food and Resource Economics, University of Copenhagen)

  • Géraldine Henningsen

    ()
    (Risø National Laboratory for Sustainable Energy, Technical University of Denmark)

Abstract

The Constant Elasticity of Substitution (CES) function is popular in several areas of economics, but it is rarely used in econometric analysis because it cannot be estimated by standard linear regression techniques. We discuss several existing approaches and propose a new grid-search approach for estimating the traditional CES function with two inputs as well as nested CES functions with three and four inputs. Furthermore, we demonstrate how these approaches can be applied in R using the add-on package micEconCES and we describe how the various estimation approaches are implemented in the micEconCES package. Finally, we illustrate the usage of this package by replicating some estimations of CES functions that are reported in the literature.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2011/WP_2011_9_econometric_estimation_CES.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Copenhagen, Department of Food and Resource Economics in its series IFRO Working Paper with number 2011/9.

as in new window
Length: 107 pages
Date of creation: Jun 2011
Date of revision:
Handle: RePEc:foi:wpaper:2011_9

Contact details of provider:
Email:
Web page: http://www.ifro.ku.dk/
More information through EDIRC

Related research

Keywords: constant elasticity of substitution; CES; nested CES; R;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Klump, Rainer & Papageorgiou, Chris, 2008. "Editorial introduction The CES production function in the theory and empirics of economic growth," Journal of Macroeconomics, Elsevier, vol. 30(2), pages 599-600, June.
  2. Pandey, Manish, 2008. "Human capital aggregation and relative wages across countries," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1587-1601, December.
  3. León-Ledesma, Miguel A. & McAdam, Peter & Willman, Alpo, 2009. "Identifying the elasticity of substitution with biased technical change," Working Paper Series 1001, European Central Bank.
  4. Chris Papageorgiou & Marianne Saam, . "Two-Level CES Production Technology in the Solow and Diamond Growth Models," Departmental Working Papers 2005-07, Department of Economics, Louisiana State University.
  5. Mishra, SK, 2006. "A Note on Numerical Estimation of Sato’s Two-Level CES Production Function," MPRA Paper 1019, University Library of Munich, Germany, revised 02 Dec 2006.
  6. Mullen, Katharine M. & Ardia, David & Gil, David L. & Windover, Donald & Cline, James, 2009. "DEoptim: An R Package for Global Optimization by Differential Evolution," MPRA Paper 21743, University Library of Munich, Germany, revised 26 Dec 2010.
  7. Rainer Klump & Peter McAdam & Alpo Willman, 2007. "Factor Substitution and Factor-Augmenting Technical Progress in the United States: A Normalized Supply-Side System Approach," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 183-192, February.
  8. Richard Anderson & William Greene & B. D. McCullough & H. D. Vinod, 2008. "The role of data/code archives in the future of economic research," Journal of Economic Methodology, Taylor & Francis Journals, vol. 15(1), pages 99-119.
  9. Winford H. Masanjala & Chris Papageorgiou, 2004. "The Solow model with CES technology: nonlinearities and parameter heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(2), pages 171-201.
  10. Kemfert, Claudia, 1998. "Estimated substitution elasticities of a nested CES production function approach for Germany," Energy Economics, Elsevier, vol. 20(3), pages 249-264, June.
  11. Arne Henningsen & Jeff D. Hamann, . "systemfit: A Package for Estimating Systems of Simultaneous Equations in R," Journal of Statistical Software, American Statistical Association, vol. 23(i04).
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Idrovo Aguirre, Byron, 2012. "Inversión en infraestructura pública y crecimiento económico, evidencia para Chile
    [Public infrastructure, investment and economic growth in Chile]
    ," MPRA Paper 39857, University Library of Munich, Germany.
  2. DURAND-LASSERVE, Olivier & Pierru , Axel & SMEERS, Yves, 2012. "Sensitivity of policy simulation to benchmark scenarios in CGE models: illustration with carbon leakage," CORE Discussion Papers 2012063, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Koesler, Simon & Schymura, Michael, 2012. "Substitution elasticities in a CES production framework: An empirical analysis on the basis of non-linear least squares estimations," ZEW Discussion Papers 12-007, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Keting Shen & John Whalley, 2013. "Capital-Labor-Energy Substitution in Nested CES Production Functions for China," NBER Working Papers 19104, National Bureau of Economic Research, Inc.
  5. Henningsen, Arne & Henningsen, Géraldine, 2012. "On estimation of the CES production function—Revisited," Economics Letters, Elsevier, vol. 115(1), pages 67-69.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:foi:wpaper:2011_9. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Geir Tveit).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.