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Comparing Fourier and Translog Specifications of Multiproduct Technology: Evidence from an Incomplete Panel of French Farmers

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  • Ivaldi, Marc, et al

Abstract

Selecting a functional form for a cost or profit function in applied production analysis is a crucial step in assessing the characteristics of a technology. The present study highlights differences in the description of a technology which are induced by fitting a Fourier or a translog cost functions. On average, both forms provide similar information on the technology. However, estimation results and statistical tests tend to favour the Fourier specification. This is mainly because many trigonometric terms appear to be significant in our application. Accordingly, our results show that the Fourier cost function is able to represent a broader range of technological structures than the translog. The paper presents an application to the case of an incomplete panel of French farmers. In the process, three technical issues are addressed: the missing data problem, the choice of the order of approximation and the conditions ensuring asymptotic normality of Fourier parameters' estimates. Coauthors are Norbert Ladoux, Herve Ossard, and Michel Simioni. Copyright 1996 by John Wiley & Sons, Ltd.

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  • Ivaldi, Marc, et al, 1996. "Comparing Fourier and Translog Specifications of Multiproduct Technology: Evidence from an Incomplete Panel of French Farmers," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 649-667, Nov.-Dec..
    • Handle: RePEc:jae:japmet:v:11:y:1996:i:6:p:649-67
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    2. John Ashton & Khac Pham, 2007. "Efficiency and Price Effects of Horizontal Bank Mergers," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2007-09, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    3. Kristof De Witte & Elbert Dijkgraaf, 2007. "Mean and Bold?," Tinbergen Institute Discussion Papers 07-092/3, Tinbergen Institute.
    4. Kristiaan Kerstens & Jafar Sadeghi & Ignace Van de Woestyne, 2020. "Plant capacity notions in a non-parametric framework: a brief review and new graph or non-oriented plant capacities," Annals of Operations Research, Springer, vol. 288(2), pages 837-860, May.
    5. Kristiaan Kerstens & Ignace Van de Woestyne, 2021. "Cost functions are nonconvex in the outputs when the technology is nonconvex: convexification is not harmless," Annals of Operations Research, Springer, vol. 305(1), pages 81-106, October.
    6. Kristiaan Kerstens & Jafar Sadeghi & Ignace Van de Woestyne, 2019. "Plant Capacity and Attainability: Exploration and Remedies," Operations Research, INFORMS, vol. 67(4), pages 1135-1149, July.
    7. Kerstens, Kristiaan & Van de Woestyne, Ignace, 2014. "Comparing Malmquist and Hicks–Moorsteen productivity indices: Exploring the impact of unbalanced vs. balanced panel data," European Journal of Operational Research, Elsevier, vol. 233(3), pages 749-758.
    8. Hendrik Wolff & Thomas Heckelei & Ron Mittelhammer, 2010. "Imposing Curvature and Monotonicity on Flexible Functional Forms: An Efficient Regional Approach," Computational Economics, Springer;Society for Computational Economics, vol. 36(4), pages 309-339, December.
    9. Neil Esho, 2000. "Scale Economies in Credit Unions: Accounting for Subsidies Is Important," Journal of Financial Services Research, Springer;Western Finance Association, vol. 18(1), pages 29-43, October.
    10. Williams, Jonathan, 2004. "Determining management behaviour in European banking," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2427-2460, October.
    11. Caroline Khan & Mike G. Tsionas, 2021. "Constraints in models of production and cost via slack-based measures," Empirical Economics, Springer, vol. 61(6), pages 3347-3374, December.
    12. Jozef Baruník & Branislav Soták, 2010. "Vplyv rôznych foriem vlastníctva na efektivitu českých a slovenských bánk: prístup analýzy stochastických hraníc [Influence of Different Ownership Forms on Efficiency of Czech and Slovak Banks: Sto," Politická ekonomie, Prague University of Economics and Business, vol. 2010(2), pages 207-224.
    13. Elisabetta Ottoz & Marina Di Giacomo, 2012. "Diversification strategies and scope economies: evidence from a sample of Italian regional bus transport providers," Applied Economics, Taylor & Francis Journals, vol. 44(22), pages 2867-2880, August.
    14. Wolff, Hendrik & Heckelei, Thomas & Mittelhammer, Ronald C., 2004. "Imposing Monotonicity And Curvature On Flexible Functional Forms," 2004 Annual meeting, August 1-4, Denver, CO 20256, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. Kerstens, Kristiaan & Sadeghi, Jafar & Van de Woestyne, Ignace, 2019. "Convex and nonconvex input-oriented technical and economic capacity measures: An empirical comparison," European Journal of Operational Research, Elsevier, vol. 276(2), pages 699-709.
    16. Tai-Hsin Huang & Chung-Hua Shen & Kuan-Chen Chen & Shen-Ju Tseng, 2011. "Measuring technical and allocative efficiencies for banks in the transition countries using the Fourier flexible cost function," Journal of Productivity Analysis, Springer, vol. 35(2), pages 143-157, April.
    17. Nguyen, Duong T.M. & McLaren, Keith Robert & Zhao, Xueyan, 2008. "Multi-Output Broadacre Agricultural Production: Estimating A Cost Function Using Quasi-Micro Farm Level Data From Australia," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6009, Australian Agricultural and Resource Economics Society.
    18. Tai‐Hsin Huang & Mei‐Hui Wang, 2003. "Estimation of Technical and Allocative Inefficiency Using Fourier Flexible Cost Frontiers for Taiwan's Banking Industry," Manchester School, University of Manchester, vol. 71(3), pages 341-362, June.
    19. Zolotoy, L., 2008. "Empirical essays on the information transfer between and the informational efficiency of stock markets," Other publications TiSEM 2a2652c6-1060-4622-8721-8, Tilburg University, School of Economics and Management.
    20. Tai-hsin Huang & Mei-hui Wang, 2004. "Comparisons of Economic Inefficiency Between Output and Input Measures of Technical Inefficiency Using the Fourier Flexible Cost Function," Journal of Productivity Analysis, Springer, vol. 22(1), pages 123-142, July.
    21. Tristan D. Skolrud, 2017. "Reducing Approximation Error in the Fourier Flexible Functional Form," Econometrics, MDPI, vol. 5(4), pages 1-16, December.
    22. Williams, Jonathan & Nguyen, Nghia, 2005. "Financial liberalisation, crisis, and restructuring: A comparative study of bank performance and bank governance in South East Asia," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2119-2154, August.

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