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Technology Modeling: Curvature is not Sufficient for Regularity

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  • William A. Barnett

    (Washington University in St. Louis)

  • Milka Kirova

    (Washington University in St. Louis)

  • Meenakshi Pasupathy

    (Washington University in St. Louis)

Abstract

We estimate the generalized McFadden (generalized quadratic) production function by GMM for a manufacturing firm that uses risky monetary assets among its inputs and for a bank that produces risky monetary assets as outputs. We impose curvature globally and monotonicity at a point, as is the capability of the model. We find that monotonicity is violated at many data points away from the one point at which it is imposed. We conclude that the model's inability to impose monotonicity globally is a serious limitation, despite the ability to impose curvature globally.

Suggested Citation

  • William A. Barnett & Milka Kirova & Meenakshi Pasupathy, 1996. "Technology Modeling: Curvature is not Sufficient for Regularity," Econometrics 9602002, University Library of Munich, Germany, revised 24 Jun 1999.
    • Handle: RePEc:wpa:wuwpem:9602002
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    Keywords

    regularity quadratic technology curvature monotonicity;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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