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Microeconometric Models of Rationing, Imperfect Markets, and Non-Negativity Constraints

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  • Lee, Lung-Fei
  • Pitt, Mark M.

Abstract

This paper provides a theoretically consistent approach to estimating demand relationships in which kink points occur either in the interior or on the vertices of the budget set. There are important classes of problems in developing countries which demonstrate such kinked budget sets including binding non-negativity constraints. This paper also extends these methods to the estimation of production structures. As an application a translog cost function for three energy inputs is estimated from cross-sections of individual Indonesian firms.

Suggested Citation

  • Lee, Lung-Fei & Pitt, Mark M., 1987. "Microeconometric Models of Rationing, Imperfect Markets, and Non-Negativity Constraints," Bulletins 7470, University of Minnesota, Economic Development Center.
  • Handle: RePEc:ags:umedbu:7470
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