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Open AccessArticle

Non-Extensive Entropy Econometrics: New Statistical Features of Constant Elasticity of Substitution-Related Models

University of Information Technology and Management, ul. Sucharskiego 2, Rzeszow 35225, Poland
Entropy 2014, 16(5), 2713-2728; https://doi.org/10.3390/e16052713
Received: 23 February 2014 / Revised: 18 April 2014 / Accepted: 12 May 2014 / Published: 16 May 2014
Power-law (PL) formalism is known to provide an appropriate framework for canonical modeling of nonlinear systems. We estimated three stochastically distinct models of constant elasticity of substitution (CES) class functions as non-linear inverse problem and showed that these PL related functions should have a closed form. The first model is related to an aggregator production function, the second to an aggregator utility function (the Armington) and the third to an aggregator technical transformation function. A q-generalization of K-L information divergence criterion function with a priori consistency constraints is proposed. Related inferential statistical indices are computed. The approach leads to robust estimation and to new findings about the true stochastic nature of this class of nonlinear—up until now—analytically intractable functions. Outputs from traditional econometric techniques (Shannon entropy, NLLS, GMM, ML) are also presented. View Full-Text
Keywords: inverse problem; q-generalization of K-L information divergence; constant elasticity of substitution functions; econometrics inverse problem; q-generalization of K-L information divergence; constant elasticity of substitution functions; econometrics
MDPI and ACS Style

Bwanakare, S. Non-Extensive Entropy Econometrics: New Statistical Features of Constant Elasticity of Substitution-Related Models. Entropy 2014, 16, 2713-2728.

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