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Title:Imposing and testing curvature conditions on a Box-Cox function PDF Logo
Authors:Koebel, Bertrand M.
Falk, Martin
Laisney, François
Issue Date:2000
Series/Report no.:ZEW Discussion Papers 00-70
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.
Subjects:input demands
concavity
inequality restrictions
Box-Cox
JEL:J31
C33
J21
E23
Document Type:Working Paper
Appears in Collections:ZEW Discussion Papers
Publikationen von Forscherinnen und Forschern des ZEW

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