Aggregate Production Functions and the Accounting Identity Critique: Further Reflections on Temple's Criticisms and Misunderstandings

Jesus Felipe () and John McCombie

Economics Working Paper Archive from Levy Economics Institute

Abstract: In a reply to Felipe and McCombie (2010a), Temple (2010) has largely ignored the main arguments that underlie the accounting identity critique of the estimation of production functions using value data. This criticism suggests that estimates of the parameters of aggregate production functions cannot be regarded as reflecting the underlying technology of the industry. While Temple concedes some points, he erroneously believes that the critique holds only under some ad hoc assumptions. As a consequence, he argues that the critique works only "part-time." This rejoinder discusses Temple's arguments and demonstrates that the critique works full-time.

Keywords: Accounting Identity; Aggregate Production Function; Aggregation Problems; Value-added Identity; Value Data (search for similar items in EconPapers)
JEL-codes: C43 O11 O16 O47 O53 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-pke
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Citations: View citations in EconPapers (1)

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