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Leveraging subjective expectations for production functions

Author

Listed:
  • Bond, Steve
  • Norris Keiller, Agnes
  • de Paula, Áureo
  • Van Reenen, John

Abstract

Norris Keiller, de Paula, and Van Reenen (2024) (NPR) propose estimating production functions using firms' subjective expectations of future output and inputs, data which are becoming increasingly available in surveys. This note compares their proposed estimator to traditional dynamic panel data (e.g., Blundell and Bond 2000) and proxy variable methods (e.g., Olley and Pakes 1996). While NPR allows for nonlinear productivity processes, we discuss commonalities with the former when those processes are linear. We note that NPR may be more robust to oligopolistic competition than the latter since it does not employ input demand relations to proxy for productivity.

Suggested Citation

  • Bond, Steve & Norris Keiller, Agnes & de Paula, Áureo & Van Reenen, John, 2026. "Leveraging subjective expectations for production functions," LSE Research Online Documents on Economics 138667, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:138667
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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