Estimation and inference under economic restrictions

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

Tree community variation in a tropical continental island according to slope aspect and human interference

ABSTRACT Associating description of unrecorded tropical tree community structure to sampling approaches that can help determine mechanisms behind floristic variation is important to further the comprehension of how plant species coexist at tropical forests. Thus, this study had the goals of (i) evaluating tree community structure on the continental island of Marambaia (23°4’37.09”S; 43°59’2.15”W) and (ii) testing the prediction that there are local scale changes in a tropical tree community structure between slopes facing different geographic orientation and with distinct human interference history. We established 60 (0.6 ha) sampling units in three different slope sites with distinct predominant geographic orientation and human interference. We sampled all woody trees with diameter at breast height (dbh) ≥ 5 cm. We found a total of 1.170 individuals representing 220 species, 120 genera and 50 families. The overall tree community structure and structural descriptors (abundance of individuals, basal area, species richness and diversity) varied extensively between the sites. The evidence presented here supports that local scale topography variations and human interference history can be important factors contributing to the known floristic heterogeneity of the Atlantic Rainforest. Future work on the study area should focus on disentangling effects from distinct causal factors over tree community variation and species occurrence

Monte Carlo evidence on cointegration and causation

The small sample performance of Granger causality tests under different model dimensions, degree of cointegration, direction of causality, and system stability are presented. Two tests based on maximum likelihood estimation of error-correction models (LR and WALD) are compared to a Wald test based on multivariate least squares estimation of a modified VAR (MWALD). In large samples all test statistics perform well in terms of size and power. For smaller samples, the LR and WALD tests perform better than the MWALD test. Overall, the LR test outperforms the other two in terms of size and power in small samples

Applying linear time-varying constraints to econometric models: With an application to demand systems

When linear equality constraints are invariant through time they can be incorporated into estimation by restricted least squares. If, however, the constraints are time-varying, this standard methodology cannot be applied. In this paper we show how to incorporate linear time-varying constraints into the estimation of econometric models. The method involves the augmentation of the observation equation of a state-space model prior to estimation by the Kalman filter. Numerical optimisation routines are used for the estimation. A simple example drawn from demand analysis is used to illustrate the method and its application

A stochastic frontier production function with flexible risk properties

This paper considers a stochastic frontier production function which has additive, heteroscedastic error structure. The model allows for negative or positive marginal production risks of inputs, as originally proposed by Just and Pope (1978). The technical efficiencies of individual firms in the sample are a function of the levels of the input variables in the stochastic frontier, in addition to the technical inefficiency effects. These are two features of the model which are not exhibited by the commonly used stochastic frontiers with multiplicative error structures, An empirical application is presented using cross-sectional data on Ethiopian peasant farmers. The null hypothesis of no technical inefficiencies of production among these farmers is accepted. Further, the flexible risk models do not fit the data on peasant farmers as well as the traditional stochastic frontier model with multiplicative error structure