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Production Functions: The Search for Identification

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  • Zvi Griliches
  • Jacques Mairesse

Abstract

Some aspects of the econometric estimation of production functions are discussed, focussing primarily on the issue of simultaneity and reviewing the stream of criticisms of Douglas' work and the response to it. We look in particular at the work that uses panel data on micro data for plants or firms and at some more recent multi-equation extensions of it. We find that researchers, in trying to evade the simultaneity problem, have shifted to the use of thinner and thinner slices of data, exacerbating thereby other problems and misspecifications. We describe the need for better data, especially on product prices at the individual observation level and on relevant cost and demand shifters, and for better behavioral theories which would encompass the large amount of heterogeneity observed at the micro level.
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Suggested Citation

  • Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers 1719, Harvard - Institute of Economic Research.
  • Handle: RePEc:fth:harver:1719
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    2. repec:cor:louvrp:-12 is not listed on IDEAS
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    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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