WHEN FLEXIBLE FORMS ARE ASKED TO FLEX TOO MUCH

Taylor series-based flexible forms cannot be interpreted as Taylor series approximations unless all data used in estimation lie in a region of convergence. When flexible forms lose their Taylor series interpretation, elasticity estimates will be biased. When the flexible form is a translog, Rotterdam, or AIDS model, the region of convergence is shown to be the entire positive orthant. Regions of convergence associated with quadratic, Leontief, and any flexible form that does not employ logged arguments are smaller and may not encompass the entire data set. Implications for production and demand analyses and experimental design are discussed.


Issue Date:
1994-07
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/31226
Published in:
Journal of Agricultural and Resource Economics, Volume 19, Number 1
Page range:
183-196
Total Pages:
14




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

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)