CES and Translog parameter estimates in a SAM-based regional general equilibrium framework

Guido Ferrari and Luca Secondi

Economic Systems Research, 2017, vol. 29, issue 1, 124-141

Abstract: The computation of General Equilibrium models crucially depends on Social Accounting Matrix (SAM)-based calibration and on how estimation/imputation are performed to reproduce the benchmark dataset as an equilibrium solution. In this paper, theoretical contributions are provided by suggesting a new procedure in which the production function parameters and the elasticity of substitution are estimated by resorting to the data contained in the SAM. To this aim, the Generalized Cross-Entropy estimator is used. Application of this self-contained procedure to the regional SAM for the Italian region Tuscany leads to empirical results consisting of the estimates of the elasticities of substitution of Constant Elasticity of Substitution and Translog production functions consistent with the theoretical background. This yields a more efficient and effective solution of Computable General Equilibrium models.

Date: 2017
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DOI: 10.1080/09535314.2017.1281233

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