Resource title

Imposing and testing curvature conditions on a Box-Cox function

Resource image

image for OpenScout resource :: Imposing and testing curvature conditions on a Box-Cox function

Resource description

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.

Resource author

Bertrand M. Koebel, Martin Falk, Fran├žois Laisney

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/24418

Resource license

Adapt according to the presented license agreement and reference the original author.