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Econometric Estimation of the “Constant Elasticity of Substitution" Function in R: Package micEconCES

Arne Henningsen and Geraldine Henningsen ()

No 2011/9, IFRO Working Paper from University of Copenhagen, Department of Food and Resource Economics

Abstract: The Constant Elasticity of Substitution (CES) function is popular in several areas of economics, but it is rarely used in econometric analysis because it cannot be estimated by standard linear regression techniques. We discuss several existing approaches and propose a new grid-search approach for estimating the traditional CES function with two inputs as well as nested CES functions with three and four inputs. Furthermore, we demonstrate how these approaches can be applied in R using the add-on package micEconCES and we describe how the various estimation approaches are implemented in the micEconCES package. Finally, we illustrate the usage of this package by replicating some estimations of CES functions that are reported in the literature.

Keywords: constant elasticity of substitution; CES; nested CES; R (search for similar items in EconPapers)
JEL-codes: C01 C13 C18 D22 D24 E23 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff
Date: 2011-06
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