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Econometric estimates of the characteristics of production are highly sensitive to the choice of dynamic specification. In this paper we propose a new approach for testing whether inputs are in static equilibrium. The procedure, which is based on the use of a generalized cost function, tests for divergences between the actual and static equilibrium quantities of all inputs simultaneously and symmetrically. We apply it to two widely used data sets, one at a high level of aggregation and the other at the firm level, and strongly reject static equilibrium in both cases.

An empirical test of the theory of exhaustible resources requires an estimate of the time path of the shadow price of the unextracted resource that generally is not observable because of the prevalence of vertical integration in natural resource industries. In this paper we use duality theory to derive an econometric model that provides a statistical test of the theory of exhaustible resources. A restricted cost function is used to obtain estimates of the shadow prices of unextracted resources. The procedure is illustrated with data for the Canadian metal mining industry. For this industry the empirical implications of the theory of exhaustible resources are strongly rejected.

In this paper a shadow normalized restricted profit function is used to test for allocative efficiency with respect to both inputs and outputs in regulated firms producing multiple outputs. The efficiency of input choices is tested by examining the relationship between marginal rates of technical substitution and input price ratios, while the efficiency of output pricing is tested by examining the relationship between the price and marginal cost of each output. Observation specific estimates of deviations from efficient behavior are obtained by specifying the shadow prices of outputs and variable inputs as functions of variables that are causally related to the sources of inefficiency. The model is estimated with data for privately-owned electric utilities in the United States. The results indicate that the price of residential output is less than its marginal cost and the price of commercial-industrial output is greater than its marginal cost. Utilities subject to fuel adjustment clauses are found to use more than the cost-minimizing amount of fuel relative to labor.

Using hedonic regression techniques, estimates of the willingness-to-pay for changes in the risks of dying can be inferred from actual behavior in market situations involving risk-dollar tradeoffs. Thaler and Rosen (1975) pioneered this approach, obtaining estimates of the value of a statistical life using labor market data, in this paper we use the hedonic technique to obtain the first estimates of the value of a statistical life from data on the market for automobiles. Our estimated value of a statistical life for the sample as a whole is $3.357 million 1986 dollars. Copyright 1990 by MIT Press.

One of the most contentious issues concerning benefit–cost analyses of environmental and other regulatory programs has been the valuation of reductions in mortality risks. The conceptual basis for most valuation exercises has been the value of a statistical life (VSL). However, despite decades of both theoretical and empirical research on the meaning and measurement of the VSL concept, there is no consensus concerning the validity of the results it produces in actual applications. In this paper, we review the development and application of the VSL approach and then propose what we believe to be a better way to value changes in mortality hazard.

The effects of tax policy on agricultural investment are investigated by estimating a dynamic interrelated input demand system. Net investment is specified to give rise to increasing internal costs of adjustment, resulting in capital inputs being quasi-fixed. The system of demand equations is derived by incorporating a quadratic normalized restricted cost function into a long-run dynamic optimization framework. Copyright 1991 by MIT Press.

The relative efficiency of privately-owned and publicly-owned electric utilities is investigated using theoretical and econometric models that allow for the effects of both ownership type and regulation. The estimation results indicate that the two types of firms are equally cost inefficient in the United States. The average effect of inefficiency is to increase the cost of production by 2.4 percent. Holding output constant, inefficiency increases the average quantities demanded of capital and labor and decreases the average quantity demanded of fuel.

A serious impediment to the design of appro,A-IL priate public policies with regard to the ''energy crisis" is the lack of general agreement concerning the determinants of energy demand. This paper considers the determinants of residential demand for electric energy. The results indicate that the long-run own-price elasticity of demand is equal to at least unity, contrary to the common assumption that demand is not responsive to price.

A bstract -The effects of resource depletion on economic growth depend critically on the elasticities of substitution between non-renewable natural resources and reproducible inputs. Estimation of the elasticities of substitution for natural resources has been hindered by the absence of data on their prices, which results from the prevalence of vertical integration in natural resource industries. In this paper we use the theory of restricted cost functions to develop a general procedure for estimating substitution possibilities for unpriced inputs. Estimation of the model with data for the Canadian metal mining industry indicates that the elasticities of substitution for the natural resource, metallic ore, are equal to unity.

In this paper we present an extensive analysis of the responses of different economic systems to the quadrupling of the world price of crude oil since October 1973. The results of government energy policies are determined by comparing the actual responses to the energy crisis in each country with those that would have occurred given market-clearing actions on the part of suppliers and demanders. The analysis indicates that the responses to the energy crisis were affected less by the type of economic system than by the magnitude of domestic crude-oil productive capacity.

A translog normalized restricted profit function is used to study the characteristics of the production function for electric energy. The results indicate that fuel choice in existing steam electric plants responds to changes in fuel prices. The production function is also tested for separability of fuels from capital and labor, homotheticity, returns to scale, and embodied technical change.

The appropriate functional form for a hedonic price equation cannot in general be specified on theoretical grounds. In this paper, a statistical procedure for the choice of functional form is proposed. A highly general functional form is specified that yields all other functional forms of interest as special cases. Likelihood ratio tests are used to test the appropriateness of alternative forms. The procedure is illustrated using cross section microdata for housing. For the case considered, the functional forms most commonly used in previous studies are strongly rejected.

Conclusions concerning trends in natural resource scarcity may depend critically on the choice of scarcity index. Unfortunately, the prevalence of vertical integration in natural resource industries has hindered the use of some otherwise desirable scarcity measures. In this paper duality theory is used to derive an econometric procedure for estimating one such measure, the shadow price of the resource in situ. Empirical results for the Canadian metal mining industry indicate that resource scarcity as measured by this shadow price has decreased substantially over time.

Industrial energy demand is estimated for each Standard Industrial Classification (SIC) two-digit manufacturing industry using flexible cost functions to derive the systems of demand equations. Industries are found to vary significantly in the characteristics of their energy demand. The price and quantity consumed of electricity, fuel oil, natural gas, and coal are included in the model. Electricity demand is found to be the least responsive and fuel oil demand the most responsive to price. The results show a significant cross price as well as own price elasticity for all types of energy. Policy considerations should keep in mind that short-run responses of demand to price will be smaller than long-run effects. The effect of price changes on fuels used for power generation will also be reflected in the demand for oil, natural gas, and coal. 19 references. (DCK)

A model for testing all types of relative price inefficiency expands the Averch-Johnson effect and makes it possible to test for absolute price efficiency, which exists if the value of the marginal product for each factor is equated to factor price and implies both cost minimization and production of the optimal quantity of output. Duality theory is used to derive the empirical model using 1973 data for electric utilities. The results indicate that relative and absolute price efficiency were generally not achieved by electric utilities in that year. 36 references, 1 table.

Duality theory has been applied increasingly in recent years to study the structure of production. A major advantage of using duality theory is that systems of input demand equations can be derived by simple differentiation, facilitating the use of flexible functional forms. Also, use of duality theory makes it possible to choose a representation of the technology which has desirable properties for estimation, such as exogeneity of the regressors. However, the use of a dual representation of production structure is appropriate only if the corresponding maintained hypothesis concerning economic behavior (e.g., cost minimization or profit maximization) is valid. The perceived advantages of the dual approach to studying production structure have led to some applications in which the maintained hypothesis concerning economic behavior is unlikely to be appropriate. For example, neoclassical cost functions have been used to study the characteristics of production in regulated industries,' despite an extensive theoretical literature indicating that a profit maximizing regulated firm would not minimize costs subject to market prices.2 In this paper we propose a generalized cost function that retains the principal advantages of the neoclassical cost function but does not require that cost minimization subject to market prices be imposed as a maintained hypothesis. In our model, firms are assumed to base their production decisions on unobservable shadow prices which reflect the effects of regulation on the effective prices of inputs. Parametric tests for cost minimization are obtained by expressing shadow prices as functions of market prices. The generalized cost function is estimated with data for regulated electric utilities. The parametric restrictions corresponding to cost minimizing behavior subject to market prices are rejected, implying that the use of a neoclassical cost function is not appropriate in this application.3

A new hedonic procedure is applied to estimate the effects of gasoline price on the demand for automobile attributes and fuel efficiency. Direct application of a comparative statics analysis circumvents the problems of identification and severe multicollinearity affecting previous hedonic studies. The results indicate that the effect of induced changes in automobile attributes in response to increases in the price of gasoline is to substantially increase fuel efficiency. The estimated elasticities of fuel efficiency with respect to the price of gasoline imply that the long-run own-price elasticity of demand for gasoline is greater than unity. 31 references.