Estimating Production Functions with Heterogeneous Firms

Salvador Navarro, David Rivers and Amit Gandhi
Additional contact information
Amit Gandhi: University of Wisconsin-Madison

No 935, 2008 Meeting Papers from Society for Economic Dynamics

Abstract: We present a new approach to the estimation of production functions that allows for richer patterns of firm heterogeneity than can be accommodated under the proxy variable methods of and Olley/Pakes and Levinsohn/Petrin. In particular, we show that the economics of the firms static input choice contains the necessary identifying information to control for the endogeneity problem in the production function. From an econometric point of view, our estimation proceeds in a single GMM step, and thus standard asymptotic standard errors are available. We consider the identification and estimation of models with heterogeneity in both input and output prices, as well as heterogeneity in factor specific productivity. Our empirical results show that we control for more of the endogeneity problem than the proxy variable approach, resulting in estimates of labor productivity nearly half as small.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2008/paper_935.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed008:935

Access Statistics for this paper

More papers in 2008 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().