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Biases in approximating log production*

* This paper is a replication of an original study

Author

Listed:
  • Kai Sun
  • Daniel J. Henderson
  • Subal C. Kumbhakar

Abstract

Most empirical work in economic growth assumes either a Cobb-Douglas production function expressed in logs or a log-approximated constant elasticity of substitution specification. Estimates from each are likely biased due to logging the model and the latter can also suffer from approximation bias. We illustrate this with a successful replication of Masanjala and Papagerogiou (2004) and then estimate both models in levels to avoid these biases. Our estimation in levels gives results in line with conventional wisdom.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Kai Sun & Daniel J. Henderson & Subal C. Kumbhakar, 2011. "Biases in approximating log production," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(4), pages 708-714, June.
    • Handle: RePEc:wly:japmet:v:26:y:2011:i:4:p:708-714
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    References listed on IDEAS

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    1. John Duffy & Chris Papageorgiou & Fidel Perez-Sebastian, 2004. "Capital-Skill Complementarity? Evidence from a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 327-344, February.
    2. Duffy, John & Papageorgiou, Chris, 2000. "A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
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    7. Byron, Ray P & Bera, Anil K, 1983. "Least Squares Approximations to Unknown Regression Functions: A Comment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 255-260, February.
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    14. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-632, Nov.-Dec..
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    Citations

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    Cited by:

    1. Oleg Badunenko & Daniel J. Henderson, 2024. "Production analysis with asymmetric noise," Journal of Productivity Analysis, Springer, vol. 61(1), pages 1-18, February.
    2. Dewitte, Ruben & Dumont, Michel & Merlevede, Bruno & Rayp, Glenn & Verschelde, Marijn, 2020. "Firm-Heterogeneous Biased Technological Change: A nonparametric approach under endogeneity," European Journal of Operational Research, Elsevier, vol. 283(3), pages 1172-1182.
    3. Manuel A. Domínguez & Ignacio N. Lobato, 2020. "Specification testing with estimated variables," Econometric Reviews, Taylor & Francis Journals, vol. 39(5), pages 476-494, May.
    4. María Pía Olivero & Yoto V. Yotov, 2012. "Dynamic gravity: endogenous country size and asset accumulation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(1), pages 64-92, February.
    5. J. M. C. Santos Silva & Silvana Tenreyro, 2022. "The Log of Gravity at 15," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 21(3), pages 423-437, September.
    6. Koen Jochmans & Vincenzo Verardi, 2022. "Instrumental‐variable estimation of exponential‐regression models with two‐way fixed effects with an application to gravity equations," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(6), pages 1121-1137, September.
    7. Prehn, Sören & Brümmer, Bernhard, 2011. "Estimation issues in disaggregate gravity trade models," DARE Discussion Papers 1107, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    8. Sam Jones, 2020. "Testing the Technology of Human Capital Production: A General‐to‐Restricted Framework," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(6), pages 1429-1455, December.
    9. Henningsen, Arne & Henningsen, Géraldine, 2012. "On estimation of the CES production function—Revisited," Economics Letters, Elsevier, vol. 115(1), pages 67-69.
    10. T.V.S.Ramamohan Rao, 2011. "Contemporary Relevance and Ongoing Controversies Related to the CES Production Function," Journal of Quantitative Economics, The Indian Econometric Society, vol. 9(2), pages 36-57, July.

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    Replication

    This item is a replication of:
  • Winford H. Masanjala & Chris Papageorgiou, 2004. "The Solow model with CES technology: nonlinearities and parameter heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(2), pages 171-201.

    • More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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    1. Biases in approximating log production (Journal of Applied Econometrics 2011) in ReplicationWiki

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