We examine estimation of a model of producer behavior in the presence of correlated measurement errors in the regressors. Scale economies and price-cost margins are estimated from a set of panel data for manufacturing plants. The paper presents a somewhat new model for estimation of these parameters which is highly flexible but with a simple regression structure. Perhaps the most important contribution of the paper is some new results on deriving parameter bounds for a regression model with errors in variables. In particular, we consider the case where the measurement errors might be correlated. We derive asymptotic standard errors for the parameter bounds. These asymptotic standard errors are compared to bootstrap estimates. Our new results on parameter bounds are applied to the estimation of the model of producer behavior.
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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number
112.
Find related papers by JEL classification: C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
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