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Imposing and testing curvature conditions on a Box-Cox function

Author

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  • Koebel, Bertrand M.
  • Falk, Martin
  • Laisney, François

Abstract

We present a new method for imposing and testing concavity of a cost function using asymptotic least squares, which can easily be implemented even for cost functions which are nonlinear in parameters. We provide an illustration on the basis of a (generalized) Box-Cox cost function with six inputs: capital, labor disaggregated in three skill levels, energy, and intermediate materials. A parametric test of the concavity of the cost function in prices is presented, and price elasticities are compared when curvature conditions are imposed and when they are not. The results show that, although concavity is statistically rejected, the estimates are not very sensitive to its imposition. We find that substitution is stronger between the different types of labor than between any other pair of inputs.

Suggested Citation

  • Koebel, Bertrand M. & Falk, Martin & Laisney, François, 2000. "Imposing and testing curvature conditions on a Box-Cox function," ZEW Discussion Papers 00-70, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:5352
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    Cited by:

    1. Falk, Martin & Koebel, Bertrand M., 2000. "Outsourcing of services, imported materials and the demand for heterogeneous labour : an application of a generalised box-cox function," ZEW Discussion Papers 00-51, ZEW - Leibniz Centre for European Economic Research.
    2. Wiebusch, A. & Henning, C., 2004. "Analyse von Transaktionskosten auf dem ländlichen Kreditmarkt in Polen," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 39.
    3. Lichter, Andreas & Peichl, Andreas & Siegloch, Sebastian, 2015. "The own-wage elasticity of labor demand: A meta-regression analysis," European Economic Review, Elsevier, vol. 80(C), pages 94-119.
    4. Henning, Christian H.C.A. & Henningsen, Arne, 2005. "Modeling Price Response of Farm Households Under Imperfect Labor Markets: A Farm Household Approach to Family Farms in Poland," 94th Seminar, April 9-10, 2005, Ashford, UK 24431, European Association of Agricultural Economists.
    5. Henningsen, Arne & Glauben, Thomas & Henning, Christian H.C.A., 2003. "Farm Household Decisions Under Various Tax Policies: Comparative Static Results And Evidence From Household Data," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25889, International Association of Agricultural Economists.
    6. Falk, Martin, 2002. "Diffusion der Informations- und Kommunikationstechnologien und die Qualifikationsstruktur der Arbeitskräfte (Diffusion of information and communication technology and the qualification structure of th," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 35(3), pages 397-410.
    7. Chen, Qiu & Mirzabaev, Alisher, 2016. "Evaluating the Impacts of Traditional Biomass Energy Use on Agricultural Production in Sichuan, China," Discussion Papers 250213, University of Bonn, Center for Development Research (ZEF).

    More about this item

    Keywords

    input demands; concavity; inequality restrictions; Box-Cox;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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