Estimating complex production functions: The importance of starting values
AbstractProduction functions that take into account uncertainty can be empirically estimated by taking a state contingent view of the world. Where there is no a priori information to allocate data amongst a small number of states, the estimation may be carried out with finite mixtures model. The complexity of the estimation almost guarantees a large number of local maxima for the likelihood function. However, it is shown, with examples, that a variation on the traditional method of finding starting values substantially improves the estimation results. One of the major benefits of the proposed method is the reliable estimation of a decision makerÃ¢s ability to substitute output between states, justifying a preference for the state contingent approach over the use of a stochastic production function.
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 InfoPaper provided by Risk and Sustainable Management Group, University of Queensland in its series Risk & Uncertainty Working Papers with number WP1R07.
Date of creation: Feb 2007
Date of revision:
Contact details of provider:
Postal: Colin Clark Building, no 39, St. Lucia, Qld. 4072
Phone: +61 7 3365 6601
Fax: +61 7 3365 6601
Web page: http://www.uq.edu.au/rsmg/index.htm
More information through EDIRC
Production function; econometrics; starting values; state contingent production;
Other versions of this item:
- Neal, Mark, 2007. "Estimating complex production functions: the importance of starting values," 2007 Conference (51st), February 13-16, 2007, Queenstown, New Zealand 10435, Australian Agricultural and Resource Economics Society.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-17 (All new papers)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Adamson).
If references are entirely missing, you can add them using this form.