NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Flexible Functional Forms and Global Curvature Conditions

W. Erwin Diewert, T.J. Wales

NBER Technical Working Paper No. 40
Issued in May 1989
NBER Program(s):   PR

Empirically estimated flexible functional forms frequently fail to satisfy the appropriate theoretical curvature conditions. Lau and Gallant and Golub have worked out methods for imposing the appropriate curvature conditions locally, but those local techniques frequently fail to yield satisfactory results. We develop two methods for imposing curvature conditions globally in the context of cost function estimation. The first method adopts Lau's technique to a generalization of a functional form first proposed by McFadden. Using this Generalized McFadden functional form, it turns out that imposing the appropriate curvature conditions at one data point imposes the conditions globally. The second method adopts a technique used by McFadden and Barnett, which is based on the fact that a non-negative sum of concave functions will be concave. Our various suggested techniques are illustrated using the U.S. Manufacturing data utilized by Berndt and Khaled

download in pdf format
   (1106 K)

email paper

This paper is available as PDF (1106 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/t0040

Published: Econometrica, Vol. 55, No. 1, pp. 43-68, (January 1987).

Users who downloaded this paper also downloaded these:
Diewert Hedonic Regressions. A Consumer Theory Approach
King and Rebelo w3185 Transitional Dynamics and Economic Growth in the Neoclassical Model
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us