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Testing the convexity hypothesis in nonparametric cost functions

Author

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  • Kristiaan Kerstens

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - ULCO - Université du Littoral Côte d'Opale - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Shirong Zhao

    (DUFES - Dongbei University of Finance and Economics, Dalian)

Abstract

We developed statistical tests in nonparametric models of production. The tests are applied to a panel of US electric power generation plants and strong evidence against convexity is found for most years in the resulting cost functions. Our results suggest that empirical researchers need to be more cautious about the often implicit embedding of the convexity assumption for the cost functions.

Suggested Citation

  • Kristiaan Kerstens & Shirong Zhao, 2025. "Testing the convexity hypothesis in nonparametric cost functions," Post-Print hal-05109507, HAL.
    • Handle: RePEc:hal:journl:hal-05109507
    DOI: 10.1016/j.econlet.2025.112196
    Note: View the original document on HAL open archive server: https://hal.science/hal-05109507v1
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    Cited by:

    1. Luisa Alama & Joan Crespo & Miguel A. Márquez & Emili Tortosa-Ausina, 2025. "Regional development, quality of government, and the performance of universities," Working Papers 2510, Department of Applied Economics II, Universidad de Valencia.

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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