Sensitivity Of The Gme Estimates To Support Bounds
The claim has been made that the Generalized Maximum Entropy (GME) estimator of Golan, Judge and Miller is not sensitive to variations in the support bounds of either the parameters or the error terms. In this paper, we scrutinized this claim by means of Monte Carlo experiments and found that the parameter estimates are impacted in a substantial way by these changes. We also analyzed the famous data sample on the US manufacturing industry used by Cobb and Douglas in 1934 and found that the GME estimator is very sensitive to changes in support bounds. We conclude with a general result by Caputo and Paris according to which any support bound variation produces unexpected responses in the parameter estimates.
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- Lence, Sergio H. & Miller, Douglas, 1998.
"Recovering Output-Specific Inputs from Aggregate Input Data: A Generalized Cross Entropy Approach,"
Staff General Research Papers
1305, Iowa State University, Department of Economics.
- Sergio H. Lence & Douglas J. Miller, 1998. "Recovering Output-Specific Inputs from Aggregate Input Data: A Generalized Cross-Entropy Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 852-867.
- Barnett, William A. & Jonas, Andrew B., 1983. "The Muntz-Szatz demand system : An application of a globally well behaved series expansion," Economics Letters, Elsevier, vol. 11(4), pages 337-342.
- Douglas J. Miller & Andrew J. Plantinga, 1999. "Modeling Land Use Decisions with Aggregate Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(1), pages 180-194.
- Caputo, Michael R. & Paris, Quirino, 2008. "Comparative statics of the generalized maximum entropy estimator of the general linear model," European Journal of Operational Research, Elsevier, vol. 185(1), pages 195-203, February.
- Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers 1488, Iowa State University, Department of Economics.
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