Assessing the effects of measurement errors on the estimation of production functions
This article explores to what extent the poor results that are often found when estimating parameters of production functions can be attributed to measurement errors, due to the use of common price deflators across firms. Because of the lack of detailed micro-economic data, econometricians have to rely on industry-wide deflators when computing outputs and intermediate inputs. A unique feature of the longitudinal data used in this paper is that it reports firm-level prices. This allows for a comparative assessment of production function parameters where the outputs and intermediate inputs are computed using both firm-specific prices and industry-wide deflators. The empirical results presented in this paper show that the use of common deflators across firms leads to lower scale estimates, mainly because of a large downward bias in the estimated coefficients for labour. Copyright © 2006 John Wiley & Sons, Ltd.
Volume (Year): 21 (2006)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www.interscience.wiley.com/jpages/0883-7252/|
|Order Information:|| Web: http://www3.interscience.wiley.com/jcatalog/subscribe.jsp?issn=0883-7252 Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- G. Steven Olley & Ariel Pakes, 1992.
"The Dynamics of Productivity in the Telecommunications Equipment Industry,"
NBER Working Papers
3977, National Bureau of Economic Research, Inc.
- Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
- George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
- Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997.
"Long-Run Implications of Investment-Specific Technological Change,"
American Economic Review,
American Economic Association, vol. 87(3), pages 342-62, June.
- Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
- Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
- Klette, T.J., 1992.
"The Inconsistency of Common Scale Estimators when Output Prices are unobserved and Endogenous,"
Harvard Institute of Economic Research Working Papers
1586, Harvard - Institute of Economic Research.
- Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-61, July-Aug..
- Tor Jakob Klette & Zvi Griliches, 1992. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Engogenous," NBER Working Papers 4026, National Bureau of Economic Research, Inc.
- Tor Jakob Klette & Zvi Griliches, 1994. "The Inconsistency of Common Scales Estimators when Output Prices are Unobserved and Endogenous," Discussion Papers 127, Statistics Norway, Research Department.
- Alonso-Borrego, César & Sánchez Mangas, Rocío, 2001. "GMM estimation of a production function with panel data : an application to Spanish manufacturing firms," DES - Working Papers. Statistics and Econometrics. WS ws015527, Universidad Carlos III de Madrid. Departamento de Estadística.
- M Arellano & O Bover, 1990.
"Another Look at the Instrumental Variable Estimation of Error-Components Models,"
CEP Discussion Papers
dp0007, Centre for Economic Performance, LSE.
- Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
- Robert E. Hall, 1986.
"The Relation Between Price and Marginal Cost in U.S. Industry,"
NBER Working Papers
1785, National Bureau of Economic Research, Inc.
- Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-47, October.
- Richard Blundell & Steve Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies.
- Mark Bils & Peter J. Klenow, 2004.
"Some Evidence on the Importance of Sticky Prices,"
Journal of Political Economy,
University of Chicago Press, vol. 112(5), pages 947-985, October.
When requesting a correction, please mention this item's handle: RePEc:jae:japmet:v:21:y:2006:i:6:p:879-891. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.