Assessing the effects of measurement errors on the estimation of production functions
AbstractThis article explores to what extent the poor results that are often found when estimating parameters of production functions can be attributed to measurement errors, due to the use of common price deflators across firms. Because of the lack of detailed micro-economic data, econometricians have to rely on industry-wide deflators when computing outputs and intermediate inputs. A unique feature of the longitudinal data used in this paper is that it reports firm-level prices. This allows for a comparative assessment of production function parameters where the outputs and intermediate inputs are computed using both firm-specific prices and industry-wide deflators. The empirical results presented in this paper show that the use of common deflators across firms leads to lower scale estimates, mainly because of a large downward bias in the estimated coefficients for labour. Copyright © 2006 John Wiley & Sons, Ltd.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.
Volume (Year): 21 (2006)
Issue (Month): 6 ()
Contact details of provider:
Web page: http://www.interscience.wiley.com/jpages/0883-7252/
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Klette, T.J., 1992.
"The Inconsistency of Common Scale Estimators when Output Prices are unobserved and Endogenous,"
Harvard Institute of Economic Research Working Papers
1586, Harvard - Institute of Economic Research.
- Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-61, July-Aug..
- Tor Jakob Klette & Zvi Griliches, 1994. "The Inconsistency of Common Scales Estimators when Output Prices are Unobserved and Endogenous," Discussion Papers 127, Research Department of Statistics Norway.
- Tor Jakob Klette & Zvi Griliches, 1992. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Engogenous," NBER Working Papers 4026, National Bureau of Economic Research, Inc.
- G. Steven Olley & Ariel Pakes, 1992.
"The Dynamics of Productivity in the Telecommunications Equipment Industry,"
NBER Working Papers
3977, National Bureau of Economic Research, Inc.
- Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
- George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
- Mark Bils & Peter J. Klenow, 2002.
"Some Evidence on the Importance of Sticky Prices,"
NBER Working Papers
9069, National Bureau of Economic Research, Inc.
- Arellano, Manuel & Bover, Olympia, 1995.
"Another look at the instrumental variable estimation of error-components models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 29-51, July.
- M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
- Richard Blundell & Steve Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies.
- Hall, Robert E, 1988.
"The Relation between Price and Marginal Cost in U.S. Industry,"
Journal of Political Economy,
University of Chicago Press, vol. 96(5), pages 921-47, October.
- Robert E. Hall, 1986. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc.
- Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997.
"Long-Run Implications of Investment-Specific Technological Change,"
American Economic Review,
American Economic Association, vol. 87(3), pages 342-62, June.
- Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
- Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
- César Alonso-Borrego & Rocío Sánchez-Mangas, 2001. "Gmm Estimation Of A Production Function With Panel Data: An Application To Spanish Manufacturing Firms," Statistics and Econometrics Working Papers ws015527, Universidad Carlos III, Departamento de Estadística y Econometría.
- Lubomir Lizal & Kamil Galuščák, 2012.
"The Impact of Capital Measurement Error Correction on Firm-Level Production Function Estimation,"
William Davidson Institute Working Papers Series
wp1026, William Davidson Institute at the University of Michigan.
- Kamil Galuscak & Lubomir Lizal, 2011. "The Impact of Capital Measurement Error Correction on Firm-Level Production Function Estimation," Working Papers 2011/09, Czech National Bank, Research Department.
- Michaela Trax & Stephan Brunow & Jens Suedekum, 2012.
"Cultural diversity and plant‐level productivity,"
Norface Discussion Paper Series
2012029, Norface Research Programme on Migration, Department of Economics, University College London.
- Trax, Michaela & Brunow, Stephan & Suedekum, Jens, 2012. "Cultural Diversity and Plant‐Level Productivity," IZA Discussion Papers 6845, Institute for the Study of Labor (IZA).
- Trax, Michaela & Brunow, Stephan & Suedekum, Jens, 2013. "Cultural diversity and plant-level productivity," DICE Discussion Papers 119, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- Michaela Trax & Stephan Brunow & Jens Suedekum, 2012. "Cultural diversity and plant-level productivity," CReAM Discussion Paper Series 1223, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
- Smeets, Valerie & Warzynski, Frederic, 2013.
"Estimating productivity with multi-product firms, pricing heterogeneity and the role of international trade,"
Journal of International Economics,
Elsevier, vol. 90(2), pages 237-244.
- Smeets, Valérie & Warzynski, Frédèric, 2011. "Estimating productivity with multi-product firms, pricing heterogeneity and the role of international trade," Working Papers 11-13, University of Aarhus, Aarhus School of Business, Department of Economics.
- Ornaghi, Carmine, 2006.
"Spillovers in product and process innovation: Evidence from manufacturing firms,"
International Journal of Industrial Organization,
Elsevier, vol. 24(2), pages 349-380, March.
- Carmine Ornaghi, 2002. "Spillovers In Product And Process Innovation: Evidence From Manufacturing Firms," Economics Working Papers we023213, Universidad Carlos III, Departamento de Economía.
- Enghin Atalay, 2012.
"Materials Prices and Productivity,"
12-11, Center for Economic Studies, U.S. Census Bureau.
- Jaumandreu, Jordi & Mairesse, Jacques, 2006. "Using price and demand information to identify production functions," MPRA Paper 1247, University Library of Munich, Germany.
- Doan, Tinh & Nguyen, Ha, 2013. "Productivity dispersion and the roles of quality of labour input and competition: A case of Vietnamese manufacturing sector," MPRA Paper 48357, University Library of Munich, Germany.
- Ornaghi, Carmine & Castiglionesi, Fabio, 2009. "On the determinants of TFP growth: evidence from Spanish manufacturing firms," Discussion Paper Series In Economics And Econometrics 0912, Economics Division, School of Social Sciences, University of Southampton.
- Ziga Zarnic, 2010. "European Electricity Market Reforms: Any Signs of Efficiency Improvements?," LICOS Discussion Papers 26210, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.