TY - JOUR

T1 - On Estimation of the CES Production Function - Revisited

A1 - Henningsen,Arne

A1 - Henningsen,Geraldine

AU - Henningsen,Arne

AU - Henningsen,Geraldine

PB - Elsevier BV

PY - 2012

Y1 - 2012

N2 - 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.

AB - 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.

KW - Constant Elasticity of Substitution

KW - Estimation

KW - Non-linear Least Squares

KW - CES function

U2 - 10.1016/j.econlet.2011.12.007

DO - 10.1016/j.econlet.2011.12.007

JO - Economics Letters

JF - Economics Letters

SN - 0165-1765

IS - 1

VL - 115

SP - 67

EP - 69

ER -