On the Identification of Gross Output Production Functions

Amit Gandhi, Salvador Navarro and David Rivers
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Amit Gandhi: University of Pennsylvania, https://economics.sas.upenn.edu/

No 20181, University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers from University of Western Ontario, Centre for Human Capital and Productivity (CHCP)

Abstract: We study the nonparametric identification of gross output production functions under the environment of the commonly employed proxy variable methods. We show that applying these methods to gross output requires additional sources of variation in the demand for flexible inputs (e.g., prices). Using a transformation of the firm’s first-order condition, we develop a new nonparametric identification strategy for gross output that can be employed even when additional sources of variation are not available. Monte Carlo evidence and estimates from Colombian and Chilean plant-level data show that our strategy performs well and is robust to deviations from the baseline setting.

Date: 2018
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Journal Article: On the Identification of Gross Output Production Functions (2020)
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