Estimating State-Contingent Production Frontiers

Christopher O'Donnell and William Griffiths ()

American Journal of Agricultural Economics, 2006, vol. 88, issue 1, 249-266

Abstract: Chambers and Quiggin (2000) use state-contingent representations of risky production technologies to establish important theoretical results concerning producer behavior under uncertainty. Unfortunately, perceived problems in the estimation of state-contingent models have limited the usefulness of the approach in policy formulation. We show that fixed and random effects state-contingent production frontiers can be conveniently estimated in a finite mixtures framework. An empirical example is provided. Compared to conventional estimation approaches, we find that estimating production frontiers in a state-contingent framework produces significantly different estimates of elasticities, firm technical efficiencies, and other quantities of economic interest. Copyright 2006, Oxford University Press.

Date: 2006
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Related works:
Working Paper: Estimating State-Contingent Production Frontiers (2004)
Working Paper: ESTIMATING STATE-CONTINGENT PRODUCTION FRONTIERS (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:88:y:2006:i:1:p:249-266

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