Production Function Estimation with Multi-Destination Firms
Geoffrey Barrows,
Hélène Ollivier and
Ariell Reshef
No 10716, CESifo Working Paper Series from CESifo
Abstract:
We develop a procedure to estimate production functions, elasticities of demand, and productivity when firms endogenously select into multiple destination markets where they compete imperfectly, and when researchers observe output denominated only in value. We show that ignoring the multi-destination dimension (i.e., exporting) yields biased and inconsistent inference. Our estimator extends the two-stage procedure of Gandhi et al. (2020) to this setting, which allows for cross-market complementarities. In Monte Carlo simulations, we show that our estimator is consistent and performs well in finite samples. Using French manufacturing data, we find average total returns to scale greater than 1, average returns to variable inputs less than 1, price elasticities of demand between -21.5 and -3.4, and learning-by-exporting effects between 0 and 4% per year. Alternative estimation procedures yield unrealistic estimates of returns to scale, demand elasticities, or both.
Keywords: production function; learning by exporting; trade; productivity (search for similar items in EconPapers)
JEL-codes: D24 F12 F63 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-ecm, nep-eff and nep-int
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Working Paper: Production Function Estimation with Multi-Destination Firms (2024) 
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10716
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