Biases in approximating log production

Sun, K; Henderson, DJ; Kumbhakar, SC

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 (2004) and then estimate both models in levels to avoid these biases. Our estimation in levels gives results in line with conventional wisdom.

Citation

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

• Journal Article Type: Article
• Publication Date: Jan 1, 2011
• Deposit Date: May 29, 2015
• Journal: Journal of Applied Econometrics
• Print ISSN: 0883-7252
• Electronic ISSN: 1099-1255
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 26
• Issue: 4
• Pages: 708-714
• DOI: https://doi.org/10.1002/jae.1229
• Publisher URL: http://dx.doi.org/10.1002/jae.1229
• Related Public URLs: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1255