PRODUCTION FUNCTION ESTIMATION WITH UNOBSERVED INPUT PRICE DISPERSION

• 成果类型: Article
• 署名作者: Grieco, Paul L. E.; Li, Shengyu; Zhang, Hongsong
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; Durham University; University of Hong Kong
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.12172
• 发表日期: 2016
• 页码: 665-689
• 关键词: substitution; elasticity

摘要

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 quantitiesusing deflated expenditure as a proxysubstantially 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.