A NOte on the Importance of Testing for Regularities for Estimated Flexible Functional Forms
AbstractIn empirical productivity analysis it has become customary to use flexible functional forms to represent a firm's production technology by estimating cost functions. In this note we suggest a procedure to calculate the region where an estimated translog cost function meet the required regularities (positive cost, positive marginal cost, homogeneous, monotonicity and concavity in input prices). We calculate this region for the US Bell cost function as reported by Evans and Heckman (1984, 1986), and show that the estimated cost function had negative marginal cost in most of the test region.
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Bibliographic InfoPaper provided by Department of Economics, University of Bergen in its series Norway; Department of Economics, University of Bergen with number 177.
Length: 10 pages
Date of creation: 1998
Date of revision:
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Postal: Department of Economics, University of Bergen Fosswinckels Gate 6. N-5007 Bergen, Norway
Web page: http://www.uib.no/econ/
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PRODUCTIVITY ; COSTS ; TESTING;
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- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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