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Estimating Production Functions of Multiproduct Firms

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  • Nelli Valmari

Abstract

Multiproduct firms constitute a considerable share of firms and account for an even greater share of production. Nevertheless, the vast majority of production function estimates are based on the assumption that firms are single-product manufacturers. This assumption is due to a lack of data on how firms allocate their inputs across their various product lines. I provide a strategy for estimating product-specific input allocations and production functions of multiproduct firms involved in monopolistic competition. The strategy is based on using firms’ product prices and output demand in solving for product-level input allocations.

Suggested Citation

  • Nelli Valmari, 2023. "Estimating Production Functions of Multiproduct Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 3315-3342.
    • Handle: RePEc:oup:restud:v:90:y:2023:i:6:p:3315-3342.
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    File URL: http://hdl.handle.net/10.1093/restud/rdad005
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