Imposing and testing curvature conditions on a Box-Cox function

Bertrand Koebel, Martin Falk and Francois Laisney

No 00-70, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We present a new method for imposing and testing concavity of a cost function using asymptotic least squares, which can easily be implemented even for cost functions which are nonlinear in parameters. We provide an illustration on the basis of a (generalized) Box-Cox cost function with six inputs: capital, labor disaggregated in three skill levels, energy, and intermediate materials. A parametric test of the concavity of the cost function in prices is presented, and price elasticities are compared when curvature conditions are imposed and when they are not. The results show that, although concavity is statistically rejected, the estimates are not very sensitive to its imposition. We find that substitution is stronger between the different types of labor than between any other pair of inputs.

Keywords: input demands; concavity; inequality restrictions; Box-Cox (search for similar items in EconPapers)
JEL-codes: C33 E23 J21 J31 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:5352

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