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A generalization of the Symmetric Translog functional form

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  • Diewert, W. Erwin

Abstract

Feenstra and Weinstein introduced a special case of the translog cost function, the Symmetric Translog (ST) Cost Function, which replaced all of the second order parameters which are present in the Translog functional form by a single positive parameter. The ST functional form is useful in the context of estimating consumer preferences over related products and provides an alternative to the use of Constant Elasticity of Substitution (CES) preferences in this context. The ST functional form has a potential advantage over the CES functional form that it produces finite estimates for reservation prices for missing products whereas the CES reservation prices are always infinite. The present paper proposes a Generalized Symmetric Translog Cost Function which also generates finite reservation prices but is more flexible than the ST functional form.

Suggested Citation

  • Diewert, W. Erwin, 2024. "A generalization of the Symmetric Translog functional form," Journal of International Economics, Elsevier, vol. 151(C).
    • Handle: RePEc:eee:inecon:v:151:y:2024:i:c:s0022199623001071
    DOI: 10.1016/j.jinteco.2023.103821
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    References listed on IDEAS

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    1. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    2. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-383, June.
    3. Robert C. Feenstra & David E. Weinstein, 2017. "Globalization, Markups, and US Welfare," Journal of Political Economy, University of Chicago Press, vol. 125(4), pages 1040-1074.
    4. Diewert, W. E. & Wales, T. J., 1988. "A normalized quadratic semiflexible functional form," Journal of Econometrics, Elsevier, vol. 37(3), pages 327-342, March.
    5. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    6. Hirofumi Uzawa, 1962. "Production Functions with Constant Elasticities of Substitution," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 29(4), pages 291-299.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Translog functional form; Symmetric Translog functional form; Generalized Symmetric Translog functional form; Consumer demand systems; Reservation prices; Elasticities of substitution;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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