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Empirically estimated flexible functional forms frequently fail to satisfy the appropriate theoretical curvature conditions. Lau and Gallant and Golub have worked out methods for imposing the appropriate curvature conditions locally, but those local techniques frequently fail to yield satisfactory results. We develop two methods for imposing curvature conditions globally in the context of cost function estimation. The first method adopts Lau's technique to a generalization of a functional form first proposed by McFadden. Using this Generalized McFadden functional form, it turns out that imposing the appropriate curvature conditions at one data point imposes the conditions globally. The second method adopts a technique used by McFadden and Barnett, which is based on the fact that a non-negative sum of concave functions will be concave. Our various suggested techniques are illustrated using the U.S. Manufacturing data utilized by Berndt and Khaled

Production functions (Economic theory)

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This paper explores the causes and consequences of the more important market failures which impede the development of LDCs, and explains why the non-market institutions which often ameliorate the effects of market failures in developed countries are less effective in doing so in LDCs. This paper focuses, in particular, on those market failures which arise from imperfect information (as in the capital market) or which are almost inevitably associated with the learning which must occur if the less developed countries are successfully to make the transition to being more developed. Among the consequences of learning-by-doing, of localized learning, and of learning-to-learn are imperfections of competition, multiple equilibria, hysteresis, and the optimality of non-myopic policies. These market failures are markedly different from those that were the center of attention in earlier literature, which led to arguments for government planning. Government interventions need to recognize the source of market failures; informational problems affect the government no less than the private sector. In some cases, interventions should be directed at making markets work more effectively; in other cases, the government may take a role in establishing non-market institutions to ameliorate the effects of market failure.

Industrial organization (Economic theory)

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Industrial organization (Economic theory) --- Industrial organization (Economic theory)

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The present study is a preliminary draft on nonlinear economic dynamics, with which the author has been concerned the last years. It grew out from the joint work by Professor Martin Beckmann and the present author on nonlinear statics in spatial economics, Beckmann and Puu, "Spatial Economics" (North-Holland 1985). The monograph mentioned contains sections on price waves and business cycles, but in a linear format. The rest is static theory. The author has finally come to the conviction that linear dynamic modelling has very little to yield. This is due to the poor set of alternatives -decay or explosion of motion -pertinent to linear models. Therefore, the pr~sent work centres on non-linearity. Another distinction is that only purely causal models are dealt with, as those formatted as inter-temporal equilibria hardly belong to the more restricted field of dynamics. The spatial origin is visible in the choice of models. Chapter 2 summarizes the work by the author on the stmctural stability of continuous spatial market equilibrium models. Chapter 3 deals with a re-formulation of the ingenious population growth and diffusion model invented by the young Hotelling in 1921. Chapter 4 is a detailed digression on business cycle models in a continuous spatial format with interregional trade.

Quantitative methods (economics) --- Business & Economics --- Economic Theory

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Capital market --- Uncertainty --- Rational expectations (Economic theory)