Nonparametric estimation methods avoid functional form misspecification. However, the flexibility of nonparametric methods often cause difficulties in interpreting production function estimates. However, microeconomic theory provides additional structure for modeling a production or cost function which can be interpreted as shape constraints. Several nonparametric shape constrained estimators have been proposed that combine the advantage of avoiding functional misspecification with improving the interpretability of estimation results. We will review the recent work by our research team in this area.
Posted in Seminars.