A Classifier-Lasso Approach for Estimating Production Functions with Latent Group Structures

Daniel Czarnowske

Papers from arXiv.org

Abstract: I present a new estimation procedure for production functions with latent group structures. I consider production functions that are heterogeneous across groups but time-homogeneous within groups, and where the group membership of the firms is unknown. My estimation procedure is fully data-driven and embeds recent identification strategies from the production function literature into the classifier-Lasso. Simulation experiments demonstrate that firms are assigned to their correct latent group with probability close to one. I apply my estimation procedure to a panel of Chilean firms and find sizable differences in the estimates compared to the standard approach of classification by industry.

Date: 2022-03
New Economics Papers: this item is included in nep-ecm and nep-eff
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