Nested CES production functions are very popular in economic applications, but their empirical validity has been questioned. In this paper, we outline a simple method that can be used to test whether a given dataset is consistent with a CES production technology and that informs on which nesting structure describes it more closely. The method is based on empirical testing input separability conditions, derived for all the feasible 3-input and 4-input nested CES. A Monte Carlo simulation environment is exploited to assess the accuracy of the test.
Which nesting structure for the CES? A new selection approach based on input separability
Lagomarsino E
2021-01-01
Abstract
Nested CES production functions are very popular in economic applications, but their empirical validity has been questioned. In this paper, we outline a simple method that can be used to test whether a given dataset is consistent with a CES production technology and that informs on which nesting structure describes it more closely. The method is based on empirical testing input separability conditions, derived for all the feasible 3-input and 4-input nested CES. A Monte Carlo simulation environment is exploited to assess the accuracy of the test.File in questo prodotto:
File | Dimensione | Formato | |
---|---|---|---|
2.Lagomarsino_EconomicModelling.pdf
accesso chiuso
Tipologia:
Documento in versione editoriale
Dimensione
420.86 kB
Formato
Adobe PDF
|
420.86 kB | Adobe PDF | Visualizza/Apri Richiedi una copia |
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.