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Endogeneity Problems in the Estimation of Multi-Output Technologies

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  • Roibas, David
  • Arias, Carlos

Abstract

Empirical representations of multi-output technology use either quantities or ratios of outputs as explanatory variables. These specifications raise questions about the existence of endogeneity problems in the estimation of multi-output technology. We contribute to the analysis of this issue by distinguishing between two sources of endogeneity: endogeneity of the production plan and unobservability of the production plan (error in variables). Using Monte Carlo simulation, we explore the consequences of endogeneity for two empirical representations of multi-output technologies: the distance function and the transformation function. Particularly, we analyze the role played by the degree of correlation among output disturbances.

Suggested Citation

  • Roibas, David & Arias, Carlos, 2004. "Endogeneity Problems in the Estimation of Multi-Output Technologies," Efficiency Series Papers 2004/06, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
  • Handle: RePEc:oeg:wpaper:2004/06
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    File URL: https://www.unioviedo.es/oeg/ESP/esp_2004_06.pdf
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    References listed on IDEAS

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    1. Luis Orea & David Roibás & Alan Wall, 2004. "Choosing the Technical Efficiency Orientation to Analyze Firms' Technology: A Model Selection Test Approach," Journal of Productivity Analysis, Springer, vol. 22(1), pages 51-71, July.
    2. Fare, Rolf & Grosskopf, Shawna & Tyteca, Daniel, 1996. "An activity analysis model of the environmental performance of firms--application to fossil-fuel-fired electric utilities," Ecological Economics, Elsevier, vol. 18(2), pages 161-175, August.
    3. Tim Coelli & Sergio Perelman, 2000. "Technical efficiency of European railways: a distance function approach," Applied Economics, Taylor & Francis Journals, vol. 32(15), pages 1967-1976.
    4. Diewert, W. E., 1973. "Functional forms for profit and transformation functions," Journal of Economic Theory, Elsevier, vol. 6(3), pages 284-316, June.
    5. Ronald G. Felthoven & Catherine J. Morrison Paul, 2004. "Multi-Output, Nonfrontier Primal Measures of Capacity and Capacity Utilization," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 619-633.
    6. Atkinson, Scott E & Cornwell, Christopher, 1994. "Estimation of Output and Input Technical Efficiency Using a Flexible Form and Panel Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(1), pages 245-255, February.
    7. Hall, Robert E, 1973. "The Specification of Technology with Several Kinds of Output," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 878-892, July-Aug..
    8. Yair Mundlak, 1963. "Specification and Estimation of Multiproduct Production Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 45(2), pages 433-443.
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    Cited by:

    1. C. O’Donnell & K. Nguyen, 2013. "An econometric approach to estimating support prices and measures of productivity change in public hospitals," Journal of Productivity Analysis, Springer, vol. 40(3), pages 323-335, December.
    2. Géraldine Henningsen & Arne Henningsen & Uwe Jensen, 2015. "A Monte Carlo study on multiple output stochastic frontiers: a comparison of two approaches," Journal of Productivity Analysis, Springer, vol. 44(3), pages 309-320, December.
    3. repec:ags:gjagec:253147 is not listed on IDEAS
    4. Mamardashvili, Phatima & Bokusheva, Raushan & Schmid, Dierk, 2014. "Heterogeneous Farm Output and Technical Efficiency Estimates," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 63(1).
    5. Lota D. Tamini & Bruno Larue & Gale West, 2012. "Technical and environmental efficiencies and best management practices in agriculture," Applied Economics, Taylor & Francis Journals, vol. 44(13), pages 1659-1672, May.
    6. Ana Rodríguez-Álvarez & Ignacio Rosal & José Baños-Pino, 2007. "The cost of strikes in the Spanish mining sector: modelling an undesirable input with a distance function," Journal of Productivity Analysis, Springer, vol. 27(1), pages 73-83, February.

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