Biases in approximating log production

Kai Sun, Daniel J. Henderson, Subal Kumbhakar

Research output: Contribution to journalArticle

Abstract

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.
Original languageEnglish
Pages (from-to)708-714
Number of pages7
JournalJournal of Applied Econometrics
Volume26
Issue number4
Early online date12 Jun 2010
DOIs
Publication statusPublished - Jun 2011

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    Sun, K., Henderson, D. J., & Kumbhakar, S. (2011). Biases in approximating log production. Journal of Applied Econometrics, 26(4), 708-714. https://doi.org/10.1002/jae.1229