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Estimating Production Functions Using Inputs to Control for Unobservables / James Levinsohn, Amil Petrin.
- Format:
- Book
- Author/Creator:
- Levinsohn, James.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w7819.
- NBER working paper series no. w7819
- Language:
- English
- Subjects (All):
- Industrial productivity.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2000.
- Cambridge : National Bureau of Economic Research, 2000.
- Summary:
- We introduce a new method for conditioning out serially correlated unobserved shocks to the production technology by building ideas first developed in Olley and Pakes (1996). Olley and Pakes show how to use investment to control for correlation between input levels and the unobserved firm-specific productivity process. We prove that like investment, intermediate inputs (those inputs which are typically subtracted out in a value-added production function) can also solve this simultaneity problem. We highlight three potential advantages to using an intermediate inputs approach relative to investment. Our results indicate that these advantages are empirically important.
- Notes:
- Print version record
- August 2000.
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