On Input Market Frictions and Estimation of Factors' Demand

Arnaud Dupuy () and Todd Sorensen

No 2013-13, LISER Working Paper Series from Luxembourg Institute of Socio-Economic Research (LISER)

Abstract: In this paper we explore the impact of imperfectly competitive input markets on production function estimation. First order prot maximizing conditions are altered when frictions in input markets cause the elasticity of input supply to the firm to be nite. A consequence of this is that the standard econometric model used for production function estimation will be misspecified. We prove that, in all non trivial cases, finite elasticities of supply to the firm will lead to inconsistent estimates of production function parameters. Monte Carlo simulations show that the resulting bias can be economically significant.

Keywords: Input Market Frictions; Labor Market Frictions; Estimation of Factor Demand (search for similar items in EconPapers)
JEL-codes: D02 J23 J42 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2013-06
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Related works:
Journal Article: On Input Market Frictions and Estimation of Factors' Demand (2014)
Working Paper: On Input Market Frictions and Estimation of Factors’ Demand (2012)
Working Paper: On Input Market Frictions and Estimation of Factors Demand (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:irs:cepswp:2013-13

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