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A New Approach to Modelling Gnp Functions: an Application of Two‐Stage Technologies and Modifying Function Framework

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  • K.K. Gary Wong

Abstract

This paper first demonstrates that two‐stage technologies together with Lewbel's modifying function framework can provide a general procedure for combining profit functions and nominal value‐added functions to obtain new specifications of GNP functions suitable for empirical trade analysis. Next, it illustrates the usefulness of this procedure by proposing a new parametric form of a GNP function in which the derived import demand and output supply systems can be easily constrained to be regular, and the functional structure is parsimonious in the number of additional parameters. We also compare our estimates with those obtained using the familiar Translog flexible form. Results indicate that the proposed procedure is feasible and promising as a tool for generating regular and realistic import demand and output supply equations.

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  • K.K. Gary Wong, 2004. "A New Approach to Modelling Gnp Functions: an Application of Two‐Stage Technologies and Modifying Function Framework," Australian Economic Papers, Wiley Blackwell, vol. 43(3), pages 315-339, September.
    • Handle: RePEc:bla:ausecp:v:43:y:2004:i:3:p:315-339
    DOI: 10.1111/j.1467-8454.2004.00233.x
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    Cited by:

    1. Appelbaum, Elie & Kohli, Ulrich, 1998. "Import-Price Uncertainty, Production Decisions, and Relative Factor Shares," Review of International Economics, Wiley Blackwell, vol. 6(3), pages 345-360, August.
    2. Elie Appelbaum & Ulrich Kohli, 1997. "Import Price Uncertainty And The Distribution Of Income," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 620-630, November.

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