A Non‐homothetic Globally Concave Flexible Cost Function and its Application to Panel Data

Shinichiro Nakamura

The Japanese Economic Review, 2001, vol. 52, issue 2, 208-223

Abstract: A new non‐homothetic globally concave flexible cost function is introduced and applied to a panel of firms in the Japanese paper and pulp industry. This cost function is a mixture of the generalized McFadden form and the generalized Ozaki form due to Nakamura (1990). A generalized index of technical change is used in place of the standard quadratic form of time‐trend. The estimated cost function satisfied global concavity, and the symmetry condition of the Slutsky matrix was not rejected. Homotheticity was strongly rejected. JEL Classification Numbers: C33, D24.

Date: 2001
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