In this paper, we propose a price-augmenting asymptotically ideal model (AIM) cost function to investigate the effects of public infrastructure on the performance of the U.S. manufacturing industry, using KLEMS data over the period from 1953 to 2001. In doing so, we make a distinction between the productivity effect and the production factor effect of public infrastructure. This distinction allows us to focus on the more interesting productivity effect by incorporating public infrastructure into the AIM cost function through the efficiency index. Moreover, we specify the growth rate of the efficiency index as a Box–Cox function of public infrastructure and a time trend, a proxy for other technology. The excellent flexibility of our price-augmenting AIM cost function offers many insights regarding the effects of infrastructure on the U.S. manufacturing sector.

This note builds on recent work by Serletis and Shahmoradi [Macroeconomic Dynamics 9 (2005), 542–559] and estimates the AIM model at different degrees of approximation, using the same optimization procedures as in Gallant and Golub [Journal of Econometrics. 26 (1984), 295–321]. We estimate the models subject to regularity and provide a comparison between the different versions. We argue that the AIM(3) model estimated subject to global curvature currently provides the best specification for research in semiparametric modeling of consumer demand systems.

This paper focuses on the demand for money in the United States in the context of two globally flexible functional forms—the Fourier and the asymptotically ideal model (AIM)—estimated subject to full regularity, using methods suggested over 20 years ago. We provide a comparison in terms of violations of the regularity conditions for consumer maximization and in terms of output in the form of a full set of elasticities. We also provide a policy perspective, using (for the first time) parameter estimates that are consistent with global regularity, in that a very strong case can be made for abandoning the simple-sum approach to monetary aggregation, on the basis of the low elasticities of substitution among the components of the popular M2 aggregate of money.