We present a dynamic model of factor demands based on a contemporary cost function and a dynamic version of Shepard's lemma. While making only very mild assumptions on expectations and technology, we are able to present a complete characterization of the factor demand system and the contemporary cost function. We also establish a duality relationship between contemporary costs and the technology, and we provide formula for easily recovering marginal products, returns to scale, and technological change from estimated factor demands. Specific hypotheses on expectations may be tested within the family or rational expectations. A possible estimation procedure is outlined in an example..
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Length: Date of creation: Feb 1993 Date of revision: Publication status: published in Journal of Productivity Analysis, 11(3), 1999, 210-41 Handle: RePEc:cre:uqamwp:9304
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