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Estimation of technical change and price elasticities: a categorical time–varying coefficient approach

Guohua Feng (), Jiti Gao () and Xiaohui Zhang ()
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Xiaohui Zhang: University of Exeter

Journal of Productivity Analysis, 2018, vol. 50, issue 3, 117-138

Abstract: Abstract We propose a categorical time-varying coefficient translog cost function, where each coefficient is expressed as a nonparametric function of a categorical time variable, thereby allowing each time period to have its own set of coefficients. Our application to U.S. electricity firms reveals that this model offers two major advantages over the traditional time trend representation of technical change: (1) it is capable of producing estimates of productivity growth that closely track those obtained using the Törnqvist approximation to the Divisia index; and (2) it can solve a well-known problem commonly referred to as “the problem of trending elasticities”.

Keywords: Semiparametric Method; Categorical Time-varying Coefficient Model; Technical Change and Productivity (search for similar items in EconPapers)
JEL-codes: C33 D24 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Estimation of Technical Change and Price Elasticities: A Categorical Time-varying Coefficient Approach (2016) Downloads
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