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The Normalized Quadratic Expenditure Function

Author

Listed:
  • Diewert, Erwin
  • Fox, Kevin J .

Abstract

A concise introduction to the Normalized Quadratic expenditure or cost function is provided so that the interested reader will have the necessary information to understand and use this functional form. The Normalized Quadratic is an attractive functional form for use in empirical applications as correct curvature can be imposed in a parsimonious way without losing the desirable property of flexibility. We believe it is unique in this regard. Topics covered included the problem of cardinalizing utility, the modeling of nonhomothetic preferences, the use of spline functions to achieve greater flexibility and the use of a “semiflexible†approach to make it feasible to estimate systems of equations with a large number of commodities.

Suggested Citation

  • Diewert, Erwin & Fox, Kevin J ., 2009. "The Normalized Quadratic Expenditure Function," Economics working papers erwin_diewert-2009-3, Vancouver School of Economics, revised 09 Jan 2009.
  • Handle: RePEc:ubc:bricol:erwin_diewert-2009-3
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    File URL: http://www.econ.ubc.ca/diewert/dp0904.pdf
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    Cited by:

    1. Himics, Mihaly & Britz, Wolfgang, 2013. "Trade Diversion Effects of Preferential Trade Agreements Under Tariff Rate Quota Regimes," 135th Seminar, August 28-30, 2013, Belgrade, Serbia 160383, European Association of Agricultural Economists.
    2. Serletis, Apostolos & Timilsina, Govinda & Vasetsky, Olexandr, 2011. "International evidence on aggregate short-run and long-run interfuel substitution," Energy Economics, Elsevier, vol. 33(2), pages 209-216, March.

    More about this item

    Keywords

    Normalized Quadratic; expenditure function; flexible functional forms; elasticities.;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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