TY  - JOUR
AU  - Diewert,W. Erwin
AU  - Wales,T.J.
TI  - Flexible Functional Forms and Global Curvature Conditions
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 40
PY  - 1989
Y2  - May 1989
UR  - http://www.nber.org/papers/t0040
L1  - http://www.nber.org/papers/t0040.pdf
N1  - Author contact info:
W. Erwin Diewert
Department of Economics
University of British Columbia
#997-1873 East Mall
Vancouver, BC  V6T 1Z1
CANADA
Tel: 604/822-2544
Fax: 604/822-5915
E-Mail: diewert@econ.ubc.ca
AB  - 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
ER  -