On estimation of the CES production function - revisited

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningfagfællebedømt

Estimation of the non-linear Constant Elasticity of Scale (CES) function is generally considered problematic due to convergence problems and unstable and/or meaningless results. These problems often arise from a non-smooth objective function with large flat areas, the discontinuity of the CES function where the elasticity of substitution is one, and possibly significant rounding errors where the elasticity of substitution is close to one. We suggest three (combinable) solutions that alleviate these problems and improve the reliability and stability of the results.
TidsskriftEconomics Letters
Udgave nummer1
Sider (fra-til)67–69
Antal sider3
StatusUdgivet - 2012

ID: 37390744