A New Approach to Model GNP Functions: An Application of Non-Separable Two-Stage Technologies

This paper shows that two-stage technologies can provide a general procedure for combining profit and value-added functions to obtain new specifications of import demand and output supply systems. In such technologies, we assume that imports interact with other exogenous variables to produce intermediate inputs, which are in turn used to produce final outputs. To show that utility of this new approach, we use it to specify and estimate the Australian GNP function.