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Empirical properties of duality theory

Author

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  • Lusk, Jayson L.
  • Featherstone, Allen M.
  • Marsh, Thomas L.
  • Abdulkadri, Abdullahi O.

Abstract

This research examines selected empirical properties of duality relationships. Monte Carlo experiments indicate that Hessian matrices estimated from the normalised unrestricted profit, restricted profit and production functions yield conflicting results in the presence of measurement error and low relative price variability. In particular, small amounts of measurement error in quantity variables can translate into large errors in uncompensated estimates calculated via restricted and unrestricted profit and production functions. These results emphasise the need for high quality data when estimating empirical models in order to accurately determine dual relationships implied by economic theory.

Suggested Citation

  • Lusk, Jayson L. & Featherstone, Allen M. & Marsh, Thomas L. & Abdulkadri, Abdullahi O., 1997. "Empirical properties of duality theory," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(1), pages 1-24.
    • Handle: RePEc:ags:aareaj:118069
    DOI: 10.22004/ag.econ.118069
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    Cited by:

    1. Parman, Bryon & Featherstone, Allen & Coffey, Brian, 2015. "Is Efficiency Analysis All There Is With Data Envelopment Analysis," Working Papers 197532, Mississippi State University, Department of Agricultural Economics.
    2. Allen, Keighton R. & Fullerton, Thomas M., Jr., 2018. "Analyzing Small Industrial and Commercial User Demand for Electricity," MPRA Paper 98988, University Library of Munich, Germany, revised 22 Oct 2018.
    3. Gao, Zhifeng & Featherstone, Allen M., 2008. "Estimating economies of scope using the profit function: A dual approach for the normalized quadratic profit function," Economics Letters, Elsevier, vol. 100(3), pages 418-421, September.
    4. Gunathilaka, Rajapaksha P. D. & Smart, James C. R. & Fleming, Christopher M. & Hasan, Syezlin, 2018. "The impact of climate change on labour demand in the plantation sector: the case of tea production in Sri Lanka," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(3), July.
    5. Bittencourt, Mauricio Vaz Lobo & Sampaio, Armando Vaz, 2011. "Are Dual and Primal Estimations Equivalent in the Presence of Stochastic Errors in Input Demand?," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 31(2), December.
    6. Parman, Bryon & Featherstone, Allen & Amanor-Boadu, Vincent, 2014. "A Nonparametric Approach to Multi-product and Product-specific Scale Economies, Economies of Scope, and Cost Efficiency for Kansas Farms," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 161626, Southern Agricultural Economics Association.
    7. Rajapaksha P. D. Gunathilaka & James C. R. Smart & Christopher M. Fleming & Syezlin Hasan, 2018. "The impact of climate change on labour demand in the plantation sector: the case of tea production in Sri Lanka," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(3), pages 480-500, July.
    8. Bryon J. Parman & Allen M. Featherstone, 2019. "A comparison of parametric and nonparametric estimation methods for cost frontiers and economic measures," Journal of Applied Economics, Taylor & Francis Journals, vol. 22(1), pages 60-85, January.

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