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Tests of representative firm models: results for German manufacturing industries

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  • Koebel, Bertrand M.

Abstract

Many studies of producer behavior consider cost and input demand functions de-rived from microeconomic theory and estimate them on the basis of aggregate data. If firms' characteristics differs, the neglect heterogeneity can lead to estimation bias. An alternative is to restrict individual behavioral functions to be linear in the firm specific parameters. The aim of this paper is to describe aggregate producer behavior without placing too strong restrictions on the functional form and to explicitly take account of firm heterogeneity. Estimation for German manufacturing sectors confirms that ne-glected heterogeneity is an important source of bias in representative agent models. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 96-16.

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Date of creation: 1996
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Handle: RePEc:zbw:zewdip:9616

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Keywords: exact aggregation; representative firm; heterogeneity; demand system;

References

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  1. Flaig, Gebhard & Steiner, Viktor, 1993. "Searching for the "Productivity Slowdown": Some Surprising Findings from West German Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 57-65, February.
  2. W. Erwin Diewert & T.J. Wales, 1989. "Flexible Functional Forms and Global Curvature Conditions," NBER Technical Working Papers 0040, National Bureau of Economic Research, Inc.
  3. Conrad, Klaus & Unger, Ralph, 1987. "Ex post tests for short-and long-run optimization," Journal of Econometrics, Elsevier, Elsevier, vol. 36(3), pages 339-358, November.
  4. Diewert, W E & Wales, T J, 1992. "Quadratic Spline Models for Producer's Supply and Demand Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 705-22, August.
  5. Schmalensee, Richard, 1977. "Using the H-Index of Concentration with Published Data," The Review of Economics and Statistics, MIT Press, vol. 59(2), pages 186-93, May.
  6. Chavas, Jean-Paul, 1993. "On aggregation and its implications for aggregate behaviour," Ricerche Economiche, Elsevier, Elsevier, vol. 47(2), pages 201-214, June.
  7. Sleuwaegen, Leo E & Dehandschutter, Wim V, 1986. "The Critical Choice between the Concentration Ratio and the H-Index in Assessing Industry Performance," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 35(2), pages 193-208, December.
  8. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, Elsevier, vol. 19(2-3), pages 287-299, August.
  9. Heineke, John M & Shefrin, Hersh M, 1988. "Exact Aggregation and the Finite Basis Property," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(3), pages 525-38, August.
  10. Diewert, W. E., 1973. "Functional forms for profit and transformation functions," Journal of Economic Theory, Elsevier, Elsevier, vol. 6(3), pages 284-316, June.
  11. Lewbel, Arthur, 1993. "Distribution movements, macroeconomic regularities and the representative consumer," Ricerche Economiche, Elsevier, Elsevier, vol. 47(2), pages 189-199, June.
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Cited by:
  1. Henningsen, Arne & Glauben, Thomas & Henning, Christian H.C.A., 2003. "Farm Household Decisions Under Various Tax Policies: Comparative Static Results And Evidence From Household Data," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa, International Association of Agricultural Economists 25889, International Association of Agricultural Economists.
  2. Falk, Martin & Koebel, Bertrand M., 1997. "The Demand of Heterogeneous Labour in Germany," ZEW Discussion Papers 97-28, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Henning, Christian H.C.A. & Henningsen, Arne, 2005. "Modeling Price Response of Farm Households Under Imperfect Labor Markets: A Farm Household Approach to Family Farms in Poland," 94th Seminar, April 9-10, 2005, Ashford, UK, European Association of Agricultural Economists 24431, European Association of Agricultural Economists.
  4. Erik Biørn & Terje Skjerpen, 2002. "Aggregation and Aggregation Biases in Production Functions: A Panel Data Analysis of Translog Models," Discussion Papers, Research Department of Statistics Norway 317, Research Department of Statistics Norway.
  5. Lichter, Andreas & Peichl, Andreas & Siegloch, Sebastian, 2014. "The own-wage elasticity of labor demand: A meta-regression analysis," ZEW Discussion Papers 14-016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Biorn, Erik & Skjerpen, Terje, 2004. "Aggregation biases in production functions: a panel data analysis of Translog models," Research in Economics, Elsevier, Elsevier, vol. 58(1), pages 31-57, March.

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