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Empirical properties of duality theory

  • Lusk, Jayson L.
  • Featherstone, Allen M.
  • Marsh, Thomas L.
  • Abdulkadri, Abdullahi O.

This research examines selected empirical properties of duality relationships. Monte Carlo experiments indicate that Hessian matrices estimated from the normalised unrestricted profit, restricted profit and production functions yield conflicting results in the presence of measurement error and low relative price variability. In particular, small amounts of measurement error in quantity variables can translate into large errors in uncompensated estimates calculated via restricted and unrestricted profit and production functions. These results emphasise the need for high quality data when estimating empirical models in order to accurately determine dual relationships implied by economic theory.

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File URL: http://purl.umn.edu/118069
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Article provided by Australian Agricultural and Resource Economics Society in its journal Australian Journal of Agricultural and Resource Economics.

Volume (Year): 46 (2002)
Issue (Month): 1 (March)
Pages:

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Handle: RePEc:ags:aareaj:118069
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  1. Quiggin, John C. & Bui-Lan, Anh, 1984. "The Use Of Cross-Sectional Estimates Of Profit Functions For Tests Of Relative Efficiency: A Critical Review," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 28(01), April.
  2. Chambers, Robert G. & Quiggin, John, 1997. "Cost Functions and Duality for Stochastic Technologies," Working Papers 197844, University of Maryland, Department of Agricultural and Resource Economics.
  3. Appelbaum, Elie, 1978. "Testing neoclassical production theory," Journal of Econometrics, Elsevier, vol. 7(1), pages 87-102, February.
  4. Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
  5. Barry T. Coyle, 1999. "Risk Aversion and Yield Uncertainty in Duality Models of Production: A Mean-Variance Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 553-567.
  6. Rulon D. Pope & Richard E. Just, 1998. "Cost Function Estimation under Risk Aversion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(2), pages 296-302.
  7. Burgess, David F., 1975. "Duality theory and pitfalls in the specification of technologies," Journal of Econometrics, Elsevier, vol. 3(2), pages 105-121, May.
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