Estimation of the CES Production Function with Biased Technical Change: A Control Function Approach
AbstractIn this paper, I extend the Olley-Pakes (1996) estimation method to the CES production function with biased technical change. The new semi-parametric approach allows consistent estimation of the degree of returns to scale, the elasticity of substitution, and the bias in technical change. Identification of these parameters is achieved under the assumption that the data generating process reflects not only technologies but also optimizing behavior of producers. Using data from U.S. manufacturing industries over the period 1958-2005, I find strong evidence that industries are characterized by a production technology with the elasticity of substitution below one and with significant biased technical progress.
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Bibliographic InfoPaper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2012-20.
Date of creation: 2012
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Semi-parametric estimation; Panel data analysis; Returns to scale; Elasticity of substitution; Factor-augmenting technical change; Industry-level studies.;
Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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