Price deflators and the estimation of the production function

Carmine Ornaghi

Economics Letters, 2008, vol. 99, issue 1, 168-171

Abstract: The use of industry indices to deflate nominal revenues and expenditure in intermediary inputs has been found to lead to lower scale estimates of the production function. This paper proposes a new approach to solve the estimation biases due to the use of industry deflators which relies on the use of the firms' labour cost.

Date: 2008
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