Estimation and inference under economic restrictions

Parmeter, CF; Sun, K; Henderson, DJ; Kumbhakar, SC

Abstract

Estimation of economic relationships often requires imposition of constraints such as positivity or monotonicity on each observation. Methods to impose such constraints, however, vary depending upon the estimation technique employed. We describe a general methodology to impose (observation-specific) constraints for the class of linear regression estimators using a method known as constraint weighted bootstrapping. While this method has received attention in the nonparametric regression literature, we show how it can be applied for both parametric and nonparametric estimators. A benefit of this method is that imposing numerous constraints simultaneously can be performed seamlessly. We apply this method to Norwegian dairy farm data to estimate both unconstrained and constrained parametric and nonparametric models.

Citation

Parmeter, C., Sun, K., Henderson, D., & Kumbhakar, S. (2014). Estimation and inference under economic restrictions. Journal of Productivity Analysis, 41(1), 111-129. https://doi.org/10.1007/s11123-013-0339-x

• Journal Article Type: Article
• Publication Date: Feb 1, 2014
• Deposit Date: May 29, 2015
• Publicly Available Date: Oct 10, 2018
• Journal: Journal of Productivity Analysis
• Print ISSN: 0895-562X
• Electronic ISSN: 1573-0441
• Publisher: Springer Verlag
• Peer Reviewed: Peer Reviewed
• Volume: 41
• Issue: 1
• Pages: 111-129
• DOI: https://doi.org/10.1007/s11123-013-0339-x
• Publisher URL: http://dx.doi.org/10.1007/s11123-013-0339-x
• Related Public URLs: http://link.springer.com/journal/11123