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Re-examination of production, cost, and restricted profit functions using quantile regression approach

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  • Saleem Shaik

Abstract

This article estimates quantile regressions of production, cost, and restricted profit functions using a Cobb-Douglas functional form with non-Hicks neutral technology change. In contrast to previous studies, quantile regression estimates reveal the relationship between the independent (production, cost, and restricted profit) and dependent (input quantities and prices) variables at each quantile of the distribution. An empirical application using data from 48 states in United States from 1960 to 2004 indicates the returns to scale and aggregate technology not only differ across production, cost, and restricted profit functions but across states in different quantiles of the distribution. This suggests the traditional measures of returns to scale and aggregate technology are under- and overestimated in states at upper and lower quantiles, respectively.

Suggested Citation

  • Saleem Shaik, 2014. "Re-examination of production, cost, and restricted profit functions using quantile regression approach," Agricultural Economics, International Association of Agricultural Economists, vol. 45(2), pages 199-212, March.
    • Handle: RePEc:bla:agecon:v:45:y:2014:i:2:p:199-212
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    File URL: http://hdl.handle.net/10.1111/agec.12041
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    References listed on IDEAS

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    1. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    2. Fuss, Melvyn & McFadden, Daniel, 1978. "Production Economics: A Dual Approach to Theory and Applications (II): Applications of the Theory of Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 2, number fuss1978a.
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    4. Fuss, Melvyn & McFadden, Daniel, 1978. "Production Economics: A Dual Approach to Theory and Applications (I): The Theory of Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 1, number fuss1978.
    5. Lau, Lawrence J., 1976. "A characterization of the normalized restricted profit function," Journal of Economic Theory, Elsevier, vol. 12(1), pages 131-163, February.
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