Abstract

We develop a non-parametric cost function using generalized additive models and demonstrate how to test for input separability. Our empirical example focuses on Canadian cable television (CATV) provision. We estimate a new non-parametric cost function for this industry using financial and operating data collected between 1990 and 1996. This period is of particular importance from a policy perspective because CATV in Canada was a rate- and entry-regulated industry prior to 1997. The results show that the input separability assumption holds and the generalized additive model yields reliable estimates of CATV technology during this time period.

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