Product differentiation and quality in production function estimation

Nadine Hahn

No 24-049, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Production functions provide a mapping from the firms' input quantity and productivity to output quantity. This mapping only generates unbiased estimates if input and output quality variation within and between observation units is accounted for. I review and classify state-of-the-art methods to address quality and price variation in production function estimation. Even if inputs and outputs are observed in quantities, unobserved quality variation might bias production function estimates for industries with differentiated products. To account for quality variation, I introduce product characteristics to the estimation procedure and provide an application to the European car industry.

Keywords: Production Functions; Product Differentiation; Quality Control Functions (search for similar items in EconPapers)
JEL-codes: B41 C38 D22 D24 L62 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-com, nep-eff and nep-ind
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:300673

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