P. Grieco
Production Function Estimation with Unobserved Input Price Dispersion
Grieco, P.; Li, S.; Zhang, H.
Authors
S. Li
H. Zhang
Abstract
We 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.
Citation
Grieco, P., Li, S., & Zhang, H. (2016). Production Function Estimation with Unobserved Input Price Dispersion. International Economic Review, 57(2), 665-690. https://doi.org/10.1111/iere.12172
Journal Article Type | Article |
---|---|
Acceptance Date | Jan 9, 2015 |
Online Publication Date | Apr 28, 2016 |
Publication Date | May 1, 2016 |
Deposit Date | Aug 27, 2014 |
Publicly Available Date | Mar 29, 2024 |
Journal | International Economic Review |
Print ISSN | 0020-6598 |
Electronic ISSN | 1468-2354 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 57 |
Issue | 2 |
Pages | 665-690 |
DOI | https://doi.org/10.1111/iere.12172 |
Public URL | https://durham-repository.worktribe.com/output/1455070 |
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Copyright Statement
Supplementary material This is the accepted version of the following article: Grieco, P. L. E., Li, S. and Zhang, H. (2016), Production function estimation with unobserved input price dispersion. International Economic Review, 57: 665–690, which has been published in final form at https://doi.org/10.1111/iere.12172. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
Accepted Journal Article
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