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Imposing and testing curvature conditions on a Box-Cox function

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  • Koebel, Bertrand M.
  • Falk, Martin
  • Laisney, François

Abstract

We present a new method for imposing and testing concavity of a cost function using asymptotic least squares, which can easily be implemented even for cost functions which are nonlinear in parameters. We provide an illustration on the basis of a (generalized) Box-Cox cost function with six inputs: capital, labor disaggregated in three skill levels, energy, and intermediate materials. A parametric test of the concavity of the cost function in prices is presented, and price elasticities are compared when curvature conditions are imposed and when they are not. The results show that, although concavity is statistically rejected, the estimates are not very sensitive to its imposition. We find that substitution is stronger between the different types of labor than between any other pair of inputs. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 00-70.

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Date of creation: 2000
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Handle: RePEc:zbw:zewdip:5352

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Related research

Keywords: input demands; concavity; inequality restrictions; Box-Cox;

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References

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Citations

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Cited by:
  1. Falk, Martin, 2002. "Diffusion der Informations- und Kommunikationstechnologien und die Qualifikationsstruktur der Arbeitskräfte (Diffusion of information and communication technology and the qualification structure of t," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 35(3), pages 397-410.
  2. Henning, Christian H.C.A. & Henningsen, Arne, 2005. "Modeling Price Response of Farm Households Under Imperfect Labor Markets: A Farm Household Approach to Family Farms in Poland," 94th Seminar, April 9-10, 2005, Ashford, UK 24431, European Association of Agricultural Economists.
  3. Falk, Martin & Koebel, Bertrand M., 2000. "Outsourcing of services, imported materials and the demand for heterogeneous labour : an application of a generalised box-cox function," ZEW Discussion Papers 00-51, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Glauben, Thomas & Henning, Christian H.C.A. & Henningsen, Arne, 2003. "Farm household decisions under various tax policies: Comparative static results and evidence from household data," FE Working Papers 0309, Christian-Albrechts-University of Kiel, Department of Food Economics and Consumption Studies.
  5. Lichter, Andreas & Peichl, Andreas & Siegloch, Sebastian, 2014. "The own-wage elasticity of labor demand: A meta-regression analysis," ZEW Discussion Papers 14-016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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