Some aspects of the econometric estimation of production functions are discussed, focussing primarily on the issue of simultaneity and reviewing the stream of criticisms of Douglas' work and the response to it. We look in particular at the work that uses panel data on micro data for plants or firms and at some more recent multi-equation extensions of it. We find that researchers, in trying to evade the simultaneity problem, have shifted to the use of thinner and thinner slices of data, exacerbating thereby other problems and misspecifications. We describe the need for better data, especially on product prices at the individual observation level and on relevant cost and demand shifters, and for better behavioral theories which would encompass the large amount of heterogeneity observed at the micro level.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
5067.
Length: Date of creation: Mar 1995 Date of revision: Handle: RePEc:nbr:nberwo:5067
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Find related papers by JEL classification: B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Quantitative and Mathematical C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
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