Confidence Intervals for Elasticity Estimators in Translog Models

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Abstract
This paper examines the distribution functions of elasticity estimators in translog demand models. We consider the normal and ratio-of-normals distributions and present confidence intervals for the elasticity estimators. Our results suggest that only elasticity estimators based on the means of the actual cost shares are likely to follow either the normal or ratio-of-normals distribution function. Examination of three published empirical studies demonstrates that inferences regarding the values of elasticities cannot be made from point estimates along and suggests a tradeoff between the level of aggregation and the width of confidence intervals for the elasticity estimators.

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