A micro-econometric model of a short run cost function with unobserved heterogeneity

David Prentice

MPRA Paper from University Library of Munich, Germany

Abstract: Unobserved plant level heterogeneity and discrete production processes can produce problems for estimation. A structural model of discrete production decisions by heterogeneous plants is constructed and, as a case study, estimated for the U.S. Portland cement industry. A new estimator is proposed to handle the discrete production process – for which the ordered probit is a special case. Data on firm survival and exit are used to adjust all input requirement coefficients for unobserved heterogeneity. The structural model is successfully estimated. Differences between many estimated coefficients and independent estimates from external sources are statistically insignificant.

Keywords: marginal cost; portland cement; ordered probit (search for similar items in EconPapers)
JEL-codes: C25 D24 L61 (search for similar items in EconPapers)
Date: 2000-03
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Related works:
Working Paper: A Micro-Economic Model of a Short Run Cost Function with Unobserved Heterogeneity (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:28682

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