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Correlated Measurement Errors, Bounds on Parameters, and a Model of Producer Behavior

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Abstract

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.

Suggested Citation

  • Yngve Willassen & Tor Jakob Klette, 1994. "Correlated Measurement Errors, Bounds on Parameters, and a Model of Producer Behavior," Discussion Papers 112, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:112
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    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp_112.pdf
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    Cited by:

    1. Liv Belsby & Bjørn K. Wold, 1997. "Primary Schooling in Zambia Squeezed at Community and Household Level," Discussion Papers 191, Statistics Norway, Research Department.

    More about this item

    Keywords

    Estimation; errors-in-variables; parameter bounds; imperfect competition; scale economies.;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • 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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