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CES function estimation using NLS
Posted: Wed Dec 11, 2019 10:04 am
by londonphd
Hi,
I am trying to estimate the a set of two parameters of a CES function:
Code: Select all
Y = (((AL*L)^C(1)+(AK*K)^C(1))^(C(2)/C(1))+(AE*E)^C(2))^(1/C(2))
The iteration stops abruptly due to division by 0. Can I limit the range of parameters to non-zero values?
I used the
function to set starting values, but it has not helped.
thank you.
Re: CES function estimation using NLS
Posted: Wed Dec 11, 2019 10:25 am
by EViews Gareth
take logs?
Re: CES function estimation using NLS
Posted: Wed Dec 11, 2019 10:36 am
by startz
You can also replace the coefficient c(i) with exp(c(i)). That guarantees that exp(c(i)) will be positive.
Re: CES function estimation using NLS
Posted: Wed Dec 11, 2019 11:43 pm
by tvonbrasch
this article may also be of interest
t
Re: CES function estimation using NLS
Posted: Fri Dec 13, 2019 3:11 am
by londonphd
take logs?
Many thanks.
How will I type in the log of the CES function (((al*l)^c(1)+(ak*k)^c(1))^(c(2)/c(1))+(ae*e)^c(2)) ?
Thank you.
Re: CES function estimation using NLS
Posted: Wed Dec 18, 2019 3:39 pm
by Elderfield.A
You can restrict the parameters as you like, see for example this post:
http://forums.eviews.com/viewtopic.php?t=12122
The authors of the paper provided by @tvonbrasch also have an R package called micEconCES which offers some insights into how one estimates the production function directly using NLS.