The Structure of Models: Understanding Theory Reduction and Testing with a Production Example
The language of economics is the language of models. Understanding the structure of this language offers many benefits. Unfortunately, the structure is ubiquitous in implementation but absent in documentation. This paper documents the structure of models in the context of the theory reduction and testing process. The structure is used to explain why there are several legitimate ways to deal with nonspherical errors in econometric models and why the recent work on stochastic preferences and technologies is a progressive step forward for the discipline. A production modeling exercise is presented to help illuminate the concepts.
Volume (Year): 29 (2004)
Issue (Month): 01 (April)
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- Arthur Lewbel, 2001. "Demand Systems with and without Errors," American Economic Review, American Economic Association, vol. 91(3), pages 611-618, June.
- Davis, George C., 1997. "The Formal Logic Of Testing Structural Change In Meat Demand: A Methodological Analysis," Faculty Paper Series 23975, Texas A&M University, Department of Agricultural Economics.
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- George C. Davis, 1997. "The Logic of Testing Structural Change in Meat Demand: A Methodological Analysis and Appraisal," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1186-1192.
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