Estimation and inference under economic restrictions |
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Authors: | Christopher F. Parmeter Kai Sun Daniel J. Henderson Subal C. Kumbhakar |
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Affiliation: | 1. Department of Economics, University of Miami, 517-E Jenkins Building, Coral Gables, FL, 33124, USA 2. Economics and Strategy Group, Aston Business School, Aston University, Birmingham, B4 7ET, UK 3. Department of Economics, Finance and Legal Studies, University of Alabama, Tuscaloosa, AL, 35487-0224, USA 4. State University of New York at Binghamton, Binghamton, NY, USA 5. University of Stavanger Business School, Stavanger, Norway
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Abstract: | 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. |
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