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Issues and Methods in Estimating Adjustment Costs

Published online by Cambridge University Press:  10 May 2017

Larry Karp
Affiliation:
Department of Agricultural and Resource Economics, University of California, Berkeley
Richard Shumway
Affiliation:
Department of Agricultural Economics, Texas A&M University
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Extract

The practice of econometrics entails choosing which equations to include in a system, and which equations to inclue in a system, and what restrictions to impose on the parameters. There is a widespread, but not universally held, preference for making these choices on the basis of theory. Until recently, this theory has rested on the hypothesis that agents solve static optimization problems. For agents’ behavior to be consistent with this story, certain restrictions must hold. These restrictions are used in econometric models as maintained or testable hypotheses.

Type
AAEA/NAREA Invited Session: Dynamic Supply Response and Agricultural Investment
Copyright
Copyright © 1984 Northeastern Agricultural and Resource Economics Association 

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