The Econometrics Of Duality

Provides a simple introductory exposition to the basic structure of dual technique analysis - consumer behaviour and producer behaviour - which has been used by many economists since the 1970s. Includes diagrams and an index.

Our original reason for writing this book was the desire to write down in one place a complete summary of the major results in du ality theory pioneered by Ronald W. Shephard in three of his books, Cost and Production Functions (1953), Theory of Cost and Produc tion Functions (1970), and Indirect Production Functions (1974). In this way, newcomers to the field would have easy access to these important ideas. In adg,ition, we report a few new results of our own. In particular, we show the duality relationship between the profit function and the eight equivalent representations of technol ogy that were elucidated by Shephard. However, in planning the book and discussing it with colleagues it became evident that such a book would be more useful if it also provided a number of applications of Shephard's duality theory to economic problems. Thus, we have also attempted to present exam ples of the use of duality theory in areas such as efficiency measure ment, index number theory, shadow pricing, cost-benefit analysis, and econometric estimation. Much of our thinking about duality theory and its uses has been influenced by our present and former collaborators. They include Charles Blackorby, Shawna Grosskopf, Knox Lovell, Robert Russell, and, not surprisingly, Ronald W. Shephard. We have also benefit ted over the years from many discussions with W. Erwin Diewert.

Contributions to Economic Analysis: Production Economics: A Dual Approach to Theory and Applications, Volume 2 focuses on the theory of production from the standpoint of the "dual", the relationships between economic observables which are dual to physical technology. The selection first ponders on duality, intermediate inputs and value-added, Hicks' aggregation theorem and the existence of a real value-added function, and homotheticity and real value-added in Canadian manufacturing. Discussions focus on real value-added and the production structure, estimation of the production structure, double deflation and real value-added, measurement of total productivity, and duality between direct and conditional indirect utility functions. The book then examines the estimation techniques for the elasticity of substitution and other production parameters and measurement of the elasticity of factor substitution and bias of technical change. The publication takes a look at the identification of technical change in the electricity generating industry, factor substitution in electricity generation, and the effectiveness of rate-of-return regulation. Topics include statistical tests of regulatory effectiveness, profit function for a regulated firm, tests of the structure of technology, identification problems in the measurement of technical change, and measurement of disembodied technical change. The selection is a valuable source of information for economists and researchers interested in production economics.