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Regularity Of The Generalized Quadratic Production Model: A Counterexample

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  • William A. Barnett

    (Washington University in St. Louis)

  • Meenakshi Pasupathy

    (Baruch College-CUNY)

Abstract

Recently there has been a growing tendency to impose curvature, but not monotonicity, on specifications of technology. But regularity requires satisfaction of both curvature and monotonicity conditions. Without both satisfied, the second order conditions for optimizing behavior fail and duality theory fails. When neither curvature nor monotonicity are imposed, estimated flexible specifications of technology are much more likely to violate curvature than monotonicity. Hence it has been argued that there is no need to impose or check for monotonicity, when curvature has been imposed globally. But imposition of curvature may induce violations of monotonicity that otherwise would not have occurred. We explore the regularity properties of our earlier results with a multiproduct financial technology specified to be generalized quadratic. In our earlier work, we used the usual approach and accepted the usual view. We now find that imposition of curvature globally and monotonicity locally does not assure monotonicity within the region of the data. Our purpose is to alert researchers to the kinds of problems that we encountered and which we believe are largely being overlooked in the production modelling literature, as we had been overlooking them.

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Bibliographic Info

Paper provided by EconWPA in its series Econometrics with number 0112001.

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Date of creation: 06 Dec 2001
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Handle: RePEc:wpa:wuwpem:0112001

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Web page: http://128.118.178.162

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Keywords: Technology; Regularity; Curvature; Production; Flexibility;

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References

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  15. William A. Barnett & Milka Kirova & Meenakshi Pasupathy, 1994. "Estimating policy-invariant deep parameters in the financial sector when risk and growth matter," Proceedings, Federal Reserve Bank of Cleveland, pages 1402-1440.
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Citations

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Cited by:
  1. Livanis, Grigorios & Moss, Charles B., 2006. "Quasi-fixity and multiproduct firms," Economics Letters, Elsevier, vol. 93(2), pages 228-234, November.
  2. Femenia, Fabienne & Gohin, Alexandre, 2007. "Estimating price elasticities of food trade functions: How relevant is the gravity approach?," Working Papers 7211, TRADEAG - Agricultural Trade Agreements.
  3. repec:ags:mareec:54155 is not listed on IDEAS
  4. Serletis, Apostolos & Timilsina, Govinda & Vasetsky, Olexandr, 2011. "International evidence on aggregate short-run and long-run interfuel substitution," Energy Economics, Elsevier, vol. 33(2), pages 209-216, March.
  5. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," MPRA Paper 8413, University Library of Munich, Germany.
  6. Oum, Tae H. & Yan, Jia & Yu, Chunyan, 2008. "Ownership forms matter for airport efficiency: A stochastic frontier investigation of worldwide airports," Journal of Urban Economics, Elsevier, vol. 64(2), pages 422-435, September.
  7. William Barnett & Apostolos Serletis, 2009. "The Differential Approach to Demand Analysis and the Rotterdam Model," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200902, University of Kansas, Department of Economics, revised Jan 2009.
  8. Barnett, William A. & Usui, Ikuyasu, 2006. "The Theoretical Regularity Properties of the Normalized Quadratic Consumer Demand Model," MPRA Paper 410, University Library of Munich, Germany.
  9. Wolff, Hendrik & Heckelei, Thomas & Mittelhammer, Ronald C., 2004. "Imposing Monotonicity And Curvature On Flexible Functional Forms," 2004 Annual meeting, August 1-4, Denver, CO 20256, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  10. Serletis, Apostolos & Shahmoradi, Asghar, 2010. "Consumption effects of government purchases," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 892-905, September.
  11. Hendrik Wolff & Thomas Heckelei & Ron C. Mittelhammer, 2004. "Imposing Curvature and Monotonicity on Flexible Functional Forms: An Efficient Regional Approach," Econometric Society 2004 North American Summer Meetings 450, Econometric Society.
  12. Fabienne Féménia & Alexandre Gohin, 2009. "Estimating censored and non homothetic demand systems: the generalized maximum entropy approach," Working Papers SMART - LERECO 200912, INRA UMR SMART.
  13. Serletis, Apostolos & Shahmoradi, Asghar, 2008. "Semi-nonparametric estimates of interfuel substitution in U.S. energy demand," Energy Economics, Elsevier, vol. 30(5), pages 2123-2133, September.
  14. William Barnett & Barry E. Jones & Milka Kirova & Travis D. Nesmith & Meenakshi Pasupathy1, 2004. "The Nonlinear Skeletons in the Closet," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200403, University of Kansas, Department of Economics, revised May 2004.
  15. Serletis, Apostolos & Timilsina, Govinda & Vasetsky, Olexandr, 2009. "On interfuel substitution : some international evidence," Policy Research Working Paper Series 5026, The World Bank.
  16. Guohua Feng & Apostolos Serletis, 2009. "Efficiency and productivity of the US banking industry, 1998-2005: evidence from the Fourier cost function satisfying global regularity conditions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(1), pages 105-138.
  17. Feng, Guohua & Serletis, Apostolos, 2008. "Productivity trends in U.S. manufacturing: Evidence from the NQ and AIM cost functions," Journal of Econometrics, Elsevier, vol. 142(1), pages 281-311, January.

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