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Aggregate Production Functions and the Accounting Identity Critique: Further Reflections on Temple's Criticisms and Misunderstandings

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  • Jesus Felipe
  • John McCombie

Abstract

In a reply to Felipe and McCombie (2010a), Temple (2010) has largely ignored the main arguments that underlie the accounting identity critique of the estimation of production functions using value data. This criticism suggests that estimates of the parameters of aggregate production functions cannot be regarded as reflecting the underlying technology of the industry. While Temple concedes some points, he erroneously believes that the critique holds only under some ad hoc assumptions. As a consequence, he argues that the critique works only "part-time." This rejoinder discusses Temple's arguments and demonstrates that the critique works full-time.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_718.

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Date of creation: May 2012
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Handle: RePEc:lev:wrkpap:wp_718

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Web page: http://www.levyinstitute.org

Related research

Keywords: Accounting Identity; Aggregate Production Function; Aggregation Problems; Value-added Identity; Value Data;

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  1. Jonathan Temple & Ludger Wößmann, 2006. "Dualism and cross-country growth regressions," Journal of Economic Growth, Springer, vol. 11(3), pages 187-228, September.
  2. Jesus Felipe & J. S. L. McCombie, 2005. "WHY ARE SOME COUNTRIES RICHER THAN OTHERS? A SKEPTICAL VIEW OF MANKIW-ROMER-WEIL's TEST OF THE NEOCLASSICAL GROWTH MODEL," Metroeconomica, Wiley Blackwell, vol. 56(3), pages 360-392, 07.
  3. John Fernald & Brent Neiman, 2006. "Measuring the Miracle: Market Imperfections and Asia's Growth Experience," 2006 Meeting Papers, Society for Economic Dynamics 785, Society for Economic Dynamics.
  4. Jesus Felipe & Rana Hasan & J. S. L. McCombie, 2004. "Correcting For Biases When Estimating Production Functions: An Illusion Of The Laws Of Algebra?," CAMA Working Papers 2004-13, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  5. Anwar Shaikh, 2005. "Nonlinear Dynamics and Pseudo-Production Functions," Eastern Economic Journal, Eastern Economic Association, vol. 31(3), pages 447-466, Summer.
  6. Jesus Felipe & Rana Hasan & J. S. L. McCombie, 2004. "Correcting For Biases When Estimating Production Functions: An Illusion Of The Laws Of Algebra?," CAMA Working Papers 2004-13, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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