Estimating complex production functions: The importance of starting values

Mark Neal

No 151178, Risk and Sustainable Management Group Working Papers from University of Queensland, School of Economics

Abstract: Production functions that take into account uncertainty can be empirically estimated by taking a state contingent view of the world. Where there is no a priori information to allocate data amongst a small number of states, the estimation may be carried out with finite mixtures model. The complexity of the estimation almost guarantees a large number of local maxima for the likelihood function. However, it is shown, with examples, that a variation on the traditional method of finding starting values substantially improves the estimation results. One of the major benefits of the proposed method is the reliable estimation of a decision maker's ability to substitute output between states, justifying a preference for the state contingent approach over the use of a stochastic production function.

Keywords: Production Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 31
Date: 2007-01-26
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/151178/files/WPR07_1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:uqsers:151178

DOI: 10.22004/ag.econ.151178

Access Statistics for this paper

More papers in Risk and Sustainable Management Group Working Papers from University of Queensland, School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().