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The (mis-)specification of production costs in production smoothing models

Marga Peeters ()

MPRA Paper from University Library of Munich, Germany

Abstract: Estimation results obtained with production smoothing models are often imprecise and sensitive to normalisation rules. It is argued that production costs in these models can be better specified in terms of production factor costs. The resulting (factor demand) model with inventories leads to more efficient estimation results and normalisation rules become even redundant. Furthermore, the (smoothing) role of inventories with respect to production factors is discussed.

Keywords: inventories; production smoothing model; factor demand; investment; labour; production factors; econometric modeling (search for similar items in EconPapers)
JEL-codes: G31 E2 E24 (search for similar items in EconPapers)
Date: 1997
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