Biases in approximating log production
AbstractMost empirical work in economic growth assumes either a Cobb-Douglas production function expressed in logs or a log-approximated constant elasticity of substitution specification. Estimates from each are likely biased due to logging the model and the latter can also suffer from approximation bias. We illustrate this with a successful replication of Masanjala and Papagerogiou (2004) and then estimate both models in levels to avoid these biases. Our estimation in levels gives results in line with conventional wisdom.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 27527.
Date of creation: 2010
Date of revision:
Nonparametric; Kmenta Approximation; Levels; Logs; PPML;
Other versions of this item:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-03 (All new papers)
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