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Testing the convexity hypothesis in nonparametric cost functions

Author

Listed:
  • Kristiaan Kerstens

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - 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
    as

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