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Article: Production Function Estimation with Unobserved Input Price Dispersion

TitleProduction Function Estimation with Unobserved Input Price Dispersion
Authors
Issue Date2016
Citation
International Economic Review, 2016, v. 57 n. 2, p. 665-690 How to Cite?
AbstractWe propose a method to consistently estimate production functions in the presence of input price dispersion when intermediate input quantities are not observed. We find that the traditional approach to dealing with unobserved input quantities---using deflated expenditure as a proxy---substantially biases the production estimates. In contrast, our method controls for heterogeneous input prices by exploiting the first order conditions of the firm's profit maximization problem and consistently recovers the production function parameters. Using our preferred method, we provide empirical evidence of significant input price dispersion and even wider productivity dispersion than is estimated using proxy methods.
Persistent Identifierhttp://hdl.handle.net/10722/212050
ISSN
2015 Impact Factor: 1.29
2015 SCImago Journal Rankings: 2.153

 

DC FieldValueLanguage
dc.contributor.authorGrieco, P-
dc.contributor.authorLi, S-
dc.contributor.authorZhang, H-
dc.date.accessioned2015-07-21T02:20:58Z-
dc.date.available2015-07-21T02:20:58Z-
dc.date.issued2016-
dc.identifier.citationInternational Economic Review, 2016, v. 57 n. 2, p. 665-690-
dc.identifier.issn0020-6598-
dc.identifier.urihttp://hdl.handle.net/10722/212050-
dc.description.abstractWe propose a method to consistently estimate production functions in the presence of input price dispersion when intermediate input quantities are not observed. We find that the traditional approach to dealing with unobserved input quantities---using deflated expenditure as a proxy---substantially biases the production estimates. In contrast, our method controls for heterogeneous input prices by exploiting the first order conditions of the firm's profit maximization problem and consistently recovers the production function parameters. Using our preferred method, we provide empirical evidence of significant input price dispersion and even wider productivity dispersion than is estimated using proxy methods.-
dc.languageeng-
dc.relation.ispartofInternational Economic Review-
dc.titleProduction Function Estimation with Unobserved Input Price Dispersion-
dc.typeArticle-
dc.identifier.emailZhang, H: hszhang@hku.hk-
dc.identifier.authorityZhang, H=rp01776-
dc.identifier.doi10.1111/iere.12172-
dc.identifier.hkuros245509-

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