I am trying to simulate a 2-good version of a model that I’ve successfully simulated and estimated in a 1-good version. “rho” is an elasticity parameter for a Dixit-Stigitz type of model that has to exceed one. For some reason, in this 2-good version (attached), if I set rho to anything else but 2 (even 2.1) I get the error message
“the second-order cross partial of equation 3 w.r.t. trend variable k and endogenous variable h1 is not null.”
In my experience, that is a message that usually means either the model is not homogeneous of degree one in the trending variable, or some other variable is trending that wasn’t listed among the deflated variables. I’ve checked and double-checked, and everything seems right, but I keep getting this error message. Specifically, equation 3 is just a CES combination of two trending variables with elasticity rho. I’ve attached the .mod file, would appreciate any help. Thanks.
model2work1_highgam.mod (3.42 KB)