On the Non-Identification of Revenue Production Functions

David Van Dijcke

Papers from arXiv.org

Abstract: Production functions are potentially misspecified when revenue is used as a proxy for output. I formalize and strengthen this common knowledge by showing that neither the production function nor Hicks-neutral productivity can be identified with such a revenue proxy. This result obtains when relaxing the standard assumptions used in the literature to allow for imperfect competition. It holds for a large class of production functions, including all commonly used parametric forms. Among the prevalent approaches to address this issue, only those that impose assumptions on the underlying demand system can possibly identify the production function.

Date: 2022-12, Revised 2024-05
New Economics Papers: this item is included in nep-ecm and nep-eff
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http://arxiv.org/pdf/2212.04620 Latest version (application/pdf)

Related works:
Working Paper: On the non-identification of revenue production functions (2023)
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