On estimation of the CES production function - revisited

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Estimation of the non-linear Constant Elasticity of Scale (CES) function is generally considered problematic due to convergence problems and unstable and/or meaningless results. These problems often arise from a non-smooth objective function with large flat areas, the discontinuity of the CES function where the elasticity of substitution is one, and possibly significant rounding errors where the elasticity of substitution is close to one. We suggest three (combinable) solutions that alleviate these problems and improve the reliability and stability of the results.
Original languageEnglish
JournalEconomics Letters
Volume115
Issue number1
Pages (from-to)67–69
Number of pages3
ISSN0165-1765
DOIs
Publication statusPublished - 2012

ID: 37390744