Translog cost function analysis for manufacturing sector in kenya

Abstract

Developing countries need to have in place a vibrant manufacturing sector since it is a key driver of economic growth and development. This is because the sector enables a country to be competitive, boosts productivity and creates employment in the economy. The study sought to estimate the Translog cost function for Kenya’s manufacturing sector for 2019 as well as to estimate the cost factor share equations by expressing cost as a function of four inputs namely, labour, electricity, water, and petroleum products. The production function was assumed to be the Cobb-Douglas type. Using the Taylor series expansion, the Translog cost function was estimated. The parameters for the various restricted forms of the cost functions were estimated with generalized nonlinear least square estimation procedures using STATA.