Flexible Functional Forms and Global Curvature Conditions
Two methods are developed for imposing curvature conditions globally in the estimation of cost functions. The first adopts a procedure due to Lau, for imposing the conditions locally, to a generalization of a functional form proposed by McFadden. With this functional form, imposing the appropriate conditions at one data point imposes the conditions globally. The second method adopts a technique used by Diewert, McFadden, and Barnett, which is based on the fact that a nonnegative sum of concave functions is concave. The suggested techniques are illustrated using the U.S. Manufacturing data utilized by E. R. Berndt and M. S. Khaled_(1979). Copyright 1987 by The Econometric Society.
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Volume (Year): 55 (1987)
Issue (Month): 1 (January)
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- Wales, Terence J., 1977. "On the flexibility of flexible functional forms : An empirical approach," Journal of Econometrics, Elsevier, vol. 5(2), pages 183-193, March.
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- Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September.
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- White, Halbert, 1980. "Using Least Squares to Approximate Unknown Regression Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 149-170, February. Full references (including those not matched with items on IDEAS)
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