A non-homothetic globally concave flexible cost function and its application to panel data

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Abstract

A new non-homothetic globally concave flexible cost function is introduced and applied to a panel of firms in the Japanese paper and pulp industry. This cost function is a mixture of the generalized McFadden form and the generalized Ozaki form due to Nakamura (1990). A generalized index of technical change is used in place of the standard quadratic form of time-trend. The estimated cost function satisfied global concavity, and the symmetry condition of the Slutsky matrix was not rejected. Homotheticity was strongly rejected.

Original languageEnglish
Pages (from-to)208-223
Number of pages16
JournalJapanese Economic Review
Volume52
Issue number2
DOIs
Publication statusPublished - 2001 Jun

ASJC Scopus subject areas

  • Economics and Econometrics

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