ESTIMATING THE CHARACTERISTICS OF HOMOGENEOUS FUNCTIONSUSING FLEXIBLE FUNCTIONAL FORMS

A flexible functional form can provide a second-order approximation to an arbitrary unknown function at a single point. Except in special cases, the parameters of flexible forms will vary from one point of approximation to another. I use this property to show that, in general, if an unknown function is homogeneous then i) Euler's Theorem gives rise to linear equality constraints involving both the data and a set of observation-varying flexible form parameters, ii) the common practice of imposing homogeneity on flexible functional forms is unnecessarily restrictive, and iii) it is possible to obtain estimates of the observation-varying parameters of approximating flexible forms using a Singular Value Decomposition (SVD) estimator. Two illustrations are provided: artificially-generated data is used to estimate the characteristics of a generalised linear production function; and Canadian data is used to estimate the characteristics of a consumer demand system.


Issue Date:
2000-01
Publication Type:
Conference Paper/ Presentation
Record Identifier:
http://ageconsearch.umn.edu/record/123713
PURL Identifier:
http://purl.umn.edu/123713
Total Pages:
32




 Record created 2017-04-01, last modified 2018-01-22

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