All data and R code for this paper are available on the JAE Data Archive.
Biases in approximating log production†
Article first published online: 12 DEC 2010
Copyright © 2010 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 26, Issue 4, pages 708–714, June/July 2011
How to Cite
Sun, K., Henderson, D. J. and Kumbhakar, S. C. (2011), Biases in approximating log production. J. Appl. Econ., 26: 708–714. doi: 10.1002/jae.1229
- Issue published online: 19 MAY 2011
- Article first published online: 12 DEC 2010
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. Copyright © 2010 John Wiley & Sons, Ltd.