On Estimation of the CES Production Function - Revisited

Publication: Research - peer-reviewJournal article – Annual report year: 2011

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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.
Original languageEnglish
JournalEconomics Letters
Volume115
Issue number1
Pages (from-to)67-69
ISSN0165-1765
DOIs
StatePublished - 2012
Peer-reviewedYes
CitationsWeb of Science® Times Cited: 2

Keywords

  • Constant Elasticity of Substitution, Estimation, Non-linear Least Squares, CES function
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