IDEAS home Printed from https://ideas.repec.org/p/msh/ebswps/2009-3.html
   My bibliography  Save this paper

The Econometric Specification of Input Demand Systems Implied by Cost Function Representations

Author

Listed:
  • Keith R. McLaren
  • Xueyan Zhao

Abstract

In the case of input demand systems based on specification of technology by a Translog cost function, it is common to estimate either a system of share equations alone, or to supplement them by the cost function. By adding up, one of the share equations is excluded. In this paper it is argued that a system of n-1 share equations is essentially incomplete, whereas if the n-1 share equations are supplemented by the cost function the implied error structure is inadmissible. Similarly, if the technology is specified by a normalized quadratic cost function, it is common to estimate either a system of n-1 demand equations alone, or to supplement them by the cost function. In both cases, the implied error structure is again inadmissible.

Suggested Citation

  • Keith R. McLaren & Xueyan Zhao, 2009. "The Econometric Specification of Input Demand Systems Implied by Cost Function Representations," Monash Econometrics and Business Statistics Working Papers 3/09, Monash University, Department of Econometrics and Business Statistics.
    • Handle: RePEc:msh:ebswps:2009-3
    as

    Download full text from publisher

    File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2009/wp3-09.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Diewert, W E & Wales, T J, 1988. "Normalized Quadratic Systems of Consumer Demand Functions," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 303-312, July.
    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. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
    4. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, November.
    5. Giancarlo Moschini, 1988. "A Model of Production with Supply Management for the Canadian Agricultural Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(2), pages 318-329.
    6. Halvorsen, Robert & Smith, Tim R, 1986. "Substitution Possibilities for Unpriced Natural Resources: Restricted Cost Functions for the Canadian Metal Mining Industry," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 398-405, August.
    7. C. Richard Shumway, 1983. "Supply, Demand, and Technology in a Multiproduct Industry: Texas Field Crops," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(4), pages 748-760.
    8. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
    9. Fuss, Melvyn A., 1977. "The demand for energy in Canadian manufacturing : An example of the estimation of production structures with many inputs," Journal of Econometrics, Elsevier, vol. 5(1), pages 89-116, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Feng, Guohua & McLaren, Keith R. & Yang, Ou & Zhang, Xiaohui & Zhao, Xueyan, 2021. "The impact of environmental policy stringency on industrial productivity growth: A semi-parametric study of OECD countries," Energy Economics, Elsevier, vol. 100(C).
    2. Vicente Ruiz, 2016. "Groundwater Overdraft, Electricity, and Wrong Incentives: Evidence from Mexico," Working Papers 2016.05, FAERE - French Association of Environmental and Resource Economists.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jaouad, Mohamed, 1994. "An agricultural policy and trade model for Morocco," ISU General Staff Papers 1994010108000011483, Iowa State University, Department of Economics.
    2. Nguyen, Duong T.M. & McLaren, Keith Robert & Zhao, Xueyan, 2008. "Multi-Output Broadacre Agricultural Production: Estimating A Cost Function Using Quasi-Micro Farm Level Data From Australia," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6009, Australian Agricultural and Resource Economics Society.
    3. Aradhyula, Satheesh Venkata, 1989. "Policy structure, output supply and input demand for US crops," ISU General Staff Papers 198901010800009909, Iowa State University, Department of Economics.
    4. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
    5. Serletis, Apostolos & Shahmoradi, Asghar, 2007. "A Note On Imposing Local Curvature In Generalized Leontief Models," Macroeconomic Dynamics, Cambridge University Press, vol. 11(2), pages 290-294, April.
    6. Ali Jadidzadeh & Apostolos Serletis, 2016. "Sectoral Interfuel Substitution in Canada: An Application of NQ Flexible Functional Forms," The Energy Journal, , vol. 37(2), pages 181-200, April.
    7. Jeffrey LaFrance & Rulon Pope & Jesse Tack, 2011. "Risk Response in Agriculture," NBER Chapters, in: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies, pages 143-186, National Bureau of Economic Research, Inc.
    8. LaFrance, Jeffrey T., 2008. "The structure of US food demand," Journal of Econometrics, Elsevier, vol. 147(2), pages 336-349, December.
    9. Chambers, Robert & Färe, Rolf & Grosskopf, Shawna & Vardanyan, Michael, 2013. "Generalized quadratic revenue functions," Journal of Econometrics, Elsevier, vol. 173(1), pages 11-21.
    10. Chang, Dongfeng & Serletis, Apostolos, 2012. "Imposing local curvature in the QUAIDS," Economics Letters, Elsevier, vol. 115(1), pages 41-43.
    11. Jeffrey LaFrance & Rulon Pope, 2008. "The Generalized Quadratic Expenditure System," Working Papers 2008-27, School of Economic Sciences, Washington State University.
    12. Barnett, William A. & Serletis, Apostolos, 2008. "The Differential Approach to Demand Analysis and the Rotterdam Model," MPRA Paper 12319, University Library of Munich, Germany.
    13. William Barnett & Ousmane Seck, 2006. "Rotterdam vs Almost Ideal Models: Will the Best Demand Specification Please Stand Up?," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200605, University of Kansas, Department of Economics.
    14. Apostolos Serletis & Libo Xu, 2020. "Demand systems with heteroscedastic disturbances," Empirical Economics, Springer, vol. 58(4), pages 1913-1921, April.
    15. Pan, Shihua, 1990. "The microfoundations of mixed system of planning and markets: some theoretical considerations and an empirical analysis of the Chinese agriculture," ISU General Staff Papers 1990010108000010876, Iowa State University, Department of Economics.
    16. Andrea Mantovi, 2016. "Smooth preferences, symmetries and expansion vector fields," Journal of Economics, Springer, vol. 119(2), pages 147-169, October.
    17. Wieck, Christine & Heckelei, Thomas, 2004. "Development Of Marginal Cost Distributions In Dairy Production Regions Of The Eu," 2004 Annual meeting, August 1-4, Denver, CO 19943, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    18. H. Ahammad & N. Islam, 1999. "Estimating the WA Agricultural Production System: A profit function approach," Economics Discussion / Working Papers 99-11, The University of Western Australia, Department of Economics.
    19. Hossain, A. K. M. Nurul & Serletis, Apostolos, 2020. "Biofuel substitution in the U.S. transportation sector," The Journal of Economic Asymmetries, Elsevier, vol. 22(C).
    20. Kenneth Stewart, 2009. "Non-jointness and scope economies in the multiproduct symmetric generalized McFadden cost function," Journal of Productivity Analysis, Springer, vol. 32(3), pages 161-171, December.

    More about this item

    Keywords

    Cost Function; Input demands; Share equations; Translog; Normalized Quadratic; Error specification.;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:msh:ebswps:2009-3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Professor Xibin Zhang (email available below). General contact details of provider: https://edirc.repec.org/data/dxmonau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.