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Choice of the empirical definition of zero in the translog multiproduct cost functional form

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  • Yapo Genevier N’guessan
  • Allen Featherstone
  • Oluwarotimi Odeh
  • Sreedhar Upendram

Abstract

The translog cost function is valuable to researchers for empirical analysis in themodelling of indirect cost and profit functions. A flaw of the functional form is in themodelling of zero output values. This study examined the impacts of empirical definition of zero output values on price elasticities, economies of scope and scale, using the translog cost function. Estimation of a system of cost and factor share equations with regularity condition imposed was conducted. Results show that the choice of default values affects policy recommendations.

Suggested Citation

  • Yapo Genevier N’guessan & Allen Featherstone & Oluwarotimi Odeh & Sreedhar Upendram, 2017. "Choice of the empirical definition of zero in the translog multiproduct cost functional form," Applied Economics Letters, Taylor & Francis Journals, vol. 24(15), pages 1112-1120, September.
    • Handle: RePEc:taf:apeclt:v:24:y:2017:i:15:p:1112-1120
    DOI: 10.1080/13504851.2016.1259735
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    Cited by:

    1. Juan José Price & Arne Henningsen, 2023. "A ray-based input distance function to model zero-valued output quantities: Derivation and an empirical application," Journal of Productivity Analysis, Springer, vol. 60(2), pages 179-188, October.
    2. Géraldine Henningsen & Arne Henningsen & Uwe Jensen, 2015. "A Monte Carlo study on multiple output stochastic frontiers: a comparison of two approaches," Journal of Productivity Analysis, Springer, vol. 44(3), pages 309-320, December.
    3. Qiu, Jiaping & Wan, Chi & Wang, Yan, 2024. "Labor-saving innovations and capital structure," Journal of Corporate Finance, Elsevier, vol. 84(C).
    4. Ghislain B D Aihounton & Arne Henningsen, 2021. "Units of measurement and the inverse hyperbolic sine transformation," The Econometrics Journal, Royal Economic Society, vol. 24(2), pages 334-351.

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