A Symmetric Normalized Quadratic GNP Function and the U.S. Demand for Imports and Supply of Exports

Abstract

This paper reports estimates of a GNP function for the United States using data covering most of the postwar period, and it introduces a new functional form, the Symmetric Normalized Quadratic variable profit function, which is a natural extension of recent work by Diewert and Wales. This functional form allows convexity in prices and concavity in fixed inputs to be imposed globally. Empirical results indicate that the demand for imports is less price elastic than the supply exports, that an increase in labor endowment favors trade, and that a deterioration of the terms of trade mostly hurts labor.