Biases in approximating log production

Kai Sun, Daniel Henderson () and Subal Kumbhakar

MPRA Paper from University Library of Munich, Germany

Abstract: Most empirical work in economic growth assumes either a Cobb-Douglas production function expressed in logs or a log-approximated constant elasticity of substitution specification. Estimates from each are likely biased due to logging the model and the latter can also suffer from approximation bias. We illustrate this with a successful replication of Masanjala and Papagerogiou (2004) and then estimate both models in levels to avoid these biases. Our estimation in levels gives results in line with conventional wisdom.

Keywords: Nonparametric; Kmenta Approximation; Levels; Logs; PPML (search for similar items in EconPapers)
JEL-codes: C01 C13 O4 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Biases in approximating log production (2011)
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