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Estimating a non-neutral production function: a heterogeneous treatment effect approach

Author

Listed:
  • Davide Antonioli

    (Università degli Studi "G. D'Annunzio" di Chieti-Pescara)

  • Georgios Gioldasis

    (Università degli Studi di Ferrara)

  • Antonio Musolesi

    (Università degli Studi di Ferrara)

Abstract

This paper addresses the issue of estimating a production function that allows us to depart from the standard hypothesis of Hicks neutrality while also coping with the endogeneity of a dummy innovation variable. We consider specifications that relax Hicks neutrality, and we derive the testable conditions for common parametric approximations under which Hicks neutrality holds. The model is estimated through instrumental variables methods, allowing for a heterogeneous effect of innovation on the production process. The econometric analysis rejects Hicks neutrality and highlights three main features: i) a capital-saving technology of innovative with respect to non-innovative firms, ii) a locally progressive technical change and iii) fully heterogeneous technologies when comparing innovative to non-innovative firms.

Suggested Citation

  • Davide Antonioli & Georgios Gioldasis & Antonio Musolesi, 2018. "Estimating a non-neutral production function: a heterogeneous treatment effect approach," SEEDS Working Papers 0618, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Mar 2018.
    • Handle: RePEc:srt:wpaper:0618
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    References listed on IDEAS

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    More about this item

    Keywords

    Biased technical change; Hicks neutrality; Innovation; Productivity; Knowledge production function; CDM model; Instrumental variables; heterogeneous treatment effect;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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