Functional Structure and Aggregation

Daniel Primont ()
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Daniel Primont: Southern Illinois University-Carbondale

Chapter 5 in Handbook of Production Economics, 2022, pp 215-257 from Springer

Abstract: Abstract A production function can involve dozens or even hundreds of inputs that are combined to produce a single output. Economists can simplify these complex processes by positing separability restrictions which, in turn, yield (1) a particular functional structure of the production function and (2) aggregates of subsets of the inputs that can be viewed as intermediate inputs. This has the effect of reducing the number of variables that enter the economic analysis. Various combinations of separability assumptions are considered, and the resulting forms of functional structure are characterized. This survey considers not only production functions but also dual representations such as cost functions and indirect output functions thereby giving rise to aggregates of both input quantities and input prices. The extension to the case of multiple outputs is briefly considered.

Keywords: Separability; Functional structure; Aggregation; Production function; Cost function; Distance function (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-10-3455-8_22

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DOI: 10.1007/978-981-10-3455-8_22

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