A Symmetric Normalized Quadratic GNP Function and the U.S. Demand for Imports and Supply of Exports

Abstract

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. This paper reports estimates of a GNP function for the United States using data covering most of the postwar period, and it introduces a new functional form, the Symmetric Normalized Quadratic variable profit function, which is a natural extension of recent work by Diewert and Wales. This functional form allows convexity in prices and concavity in fixed inputs to be imposed globally. Empirical results indicate that the demand for imports is less price elastic than the supply exports, that an increase in labor endowment favors trade, and that a deterioration of the terms of trade mostly hurts labor.

Imposing Curvature Conditions on Flexible Functional Forms for GNP Functions

“…Table 7 reports the means and the standard errors for the four group of elasticities associated with the TL and SNQ GNP functions. The size and the sign of the elasticities are consistent with those reported by Kohli (1992), who also used Swiss data and Kohli (1993;1991, p. 236). 16 In what follows, we This outcome was also reported by Kohli(1991, p.236) when comparing different functional forms.…”

“…Finally, the new system to be estimated is made up of equations (14) and (15) with restrictions given by equations (16) and (17). The difference here is that the output share 11 equations and input share equation are normalized at different dates.…”

“…The SNQ functional form was developped by Diewert and Wales (1987), but Kohli (1993) was the first to use it to approximate a GNP function. The SNQ with technological change can be written as : …”

“…Referring to Diewert and Wales (1987) and Kohli (1993) Morey (1986) provides a complete presentation of necessary and sufficient algebraic conditions for different curvature properties used in applied economics. These conditions revolve around the properties of matrices.…”

“…Griffiths et al (2000) and Lariviere et al (2000) also used a Bayesian estimation to investigate the impact of regularity (monotonicity + curvature) conditions on the signs and magnitudes of elasticities. 3 Even though Kohli (1991) is a well-known contribution, few papers discuss curvature conditions in the context of the GNP function (see Kohli (1992Kohli ( , 1993 and Tombazos (2003)). These papers mentioned the issue of imposing curvature restrictions, but do not thoroughly assess its impact in terms of regularity violations, robustness of estimated parameters or elasticities and forecasting performance.…”