IMPOSING REGULARITY CONDITIONS ON A SYSTEM OF COST AND FACTOR SHARE EQUATIONS

William Griffiths (), Christopher O'Donnell and Agustina Tan Cruz

No 12925, Working Papers from University of New England, School of Economics

Abstract: Systems of equations comprising cost functions and first-order derivative equations are often used to estimate characteristics of production technologies. Unfortunately, many estimated systems violate the regularity conditions implied by economic theory. Sampling theory methods can be used to impose these conditions globally, but these methods destroy the flexibility properties of most functional forms. We demonstrate how Bayesian methods can be used to maintain flexibility by imposing regularity conditions locally. The Bayesian approach is used to estimate a system of cost and share equations for the merino-woolgrowing sector. The effect of local imposition of monotonicity and concavity on the signs and magnitudes of elasticities is examined.

Keywords: Demand; and; Price; Analysis (search for similar items in EconPapers)
Pages: 26
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Related works:
Journal Article: Imposing regularity conditions on a system of cost and factor share equations (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uneewp:12925

DOI: 10.22004/ag.econ.12925

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