TY - JOUR
T1 - Biases in approximating log production
AU - Sun, Kai
AU - Henderson, Daniel J.
AU - Kumbhakar, Subal
PY - 2011/6
Y1 - 2011/6
N2 - Most empirical work in economic growth assumes either a Cobb–Douglas production function expressed in logs or a log-approximated constant elasticity of substitution specification. Estimates from each are likely biased due to logging the model and the latter can also suffer from approximation bias. We illustrate this with a successful replication of Masanjala and Papagerogiou (The Solow model with CES technology: nonlinearities and parameter heterogeneity, Journal of Applied Econometrics 2004; 19: 171–201) and then estimate both models in levels to avoid these biases. Our estimation in levels gives results in line with conventional wisdom.
AB - Most empirical work in economic growth assumes either a Cobb–Douglas production function expressed in logs or a log-approximated constant elasticity of substitution specification. Estimates from each are likely biased due to logging the model and the latter can also suffer from approximation bias. We illustrate this with a successful replication of Masanjala and Papagerogiou (The Solow model with CES technology: nonlinearities and parameter heterogeneity, Journal of Applied Econometrics 2004; 19: 171–201) and then estimate both models in levels to avoid these biases. Our estimation in levels gives results in line with conventional wisdom.
UR - http://www.scopus.com/inward/record.url?scp=79956065133&partnerID=8YFLogxK
UR - http://onlinelibrary.wiley.com/doi/10.1002/jae.1229/abstract
U2 - 10.1002/jae.1229
DO - 10.1002/jae.1229
M3 - Article
SN - 0883-7252
VL - 26
SP - 708
EP - 714
JO - Journal of Applied Econometrics
JF - Journal of Applied Econometrics
IS - 4
ER -