Semiparametric Estimation of Heterogeneous Firm-level Producton Functions

Jordi Jaumandreu

No 21492, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Many exercises need to estimate firm-level production functions. The doubts start with what production function, i.e. which functional form and what heterogeneity. This paper develops a semiparametric specification for variable factors that only assumes common scale and firm’s cost minimization. It is easy to apply and use for testing restrictions. When size of the firm is not correlated with the heterogeneity of factor proportions, is equivalent to a loglinear specification with firm and time-varying elasticities. It nests the commonly used CES and homogeneous Translog production functions. It admits Hicks-neutral and biased productivity and non-competitive outcomes in the input markets.

Date: 2026-05
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