Specification and estimation of multiple output technologies: A primal approach

Subal Kumbhakar

European Journal of Operational Research, 2013, vol. 231, issue 2, 465-473

Abstract: This paper addresses specification and estimation of multiple-outputs and multiple-inputs production technology in the presence of technical inefficiency. The primary focus is on the primal formulations. Several competing specifications such as production function, input (output) distance function, input requirement function are considered. We show that all these specifications come from the same transformation function and are algebraically identical. We also show that: (i) unless the transformation function is separable (i.e., outputs are separable from inputs), the input (output) ratios in the input (output) distance function can not be treated as exogenous (uncorrelated with technical inefficiency) resulting inconsistent estimates of the input (output) distance function parameters. (ii) Even if input (output) ratios are exogenous, estimation of the input (output) distance function will result in inconsistent parameter estimates if outputs (inputs) are endogenous. We address endogeneity and instrumental variable issues in details in the context of flexible (translog) functional forms. Estimation of several specifications using both single and system approaches are discussed using Norwegian dairy farming data.

Keywords: Production function; Distance function; Input requirement function; Transformation function (search for similar items in EconPapers)
JEL-codes: C21 C31 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:231:y:2013:i:2:p:465-473

DOI: 10.1016/j.ejor.2013.05.019

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