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Formulating And Estimating Dynamic Stochastic Production Models

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  • Antle, John M.
  • Havenner, Arthur

Abstract

Both the dynamic and stochastic aspects of economic life are increasingly being recognized and incorporated in current analytics. In this paper we examine these aspects in production models, with the aim of achieving the following goals: (i) Unifying the various existing efforts into one more general analytic framework; (ii) Evaluating the tractability of the two dominant functional forms in the presence of dynamics and uncertainty; (iii) Exhaustively analyzing the estimation issues of the general form in stochastic multiperiod and multistage problems with observable and unobservable intermediate outputs; (iv) Determining the conditions under which production function and factor demand estimation is separable, i.e., when knowledge of the production process is not required for efficient factor demand estimation, and vice-versa; (v) Examining the existence of analytic factor demands in the general dynamic stochastic model; and finally, (vi) Providing alternative conditions that lead to an assortment of tractable, estimable models for empirical use. We are encouraged by the conclusion that, subject to avoiding certain pitfalls, the general production model can be extended to include both multiple periods and uncertainty, with increased empirical relevance.

Suggested Citation

  • Antle, John M. & Havenner, Arthur, 1983. "Formulating And Estimating Dynamic Stochastic Production Models," Working Papers 225711, University of California, Davis, Department of Agricultural and Resource Economics.
  • Handle: RePEc:ags:ucdavw:225711
    DOI: 10.22004/ag.econ.225711
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    References listed on IDEAS

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    1. Hansen, Lars Peter & Sargent, Thomas J., 1982. "Instrumental variables procedures for estimating linear rational expectations models," Journal of Monetary Economics, Elsevier, vol. 9(3), pages 263-296.
    2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    3. Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-1185, July.
    4. Antle, John M., 1983. "Incorporating Risk In Production Analysis," 1983 Annual Meeting, July 31-August 3, West Lafayette, Indiana 279106, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May.
    6. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    7. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    8. Norman, Alfred L, 1974. "On the Relationship Between Linear Feedback Control and First Period Certainty Equivalence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 209-215, February.
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    10. ZELLNER, Arnold & KMENTA, Jan & DREZE, Jacques H., 1966. "Specification and estimation of Cobb-Douglas production function models," LIDAM Reprints CORE 12, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

    1. Elaine M. Liu, 2013. "Time to Change What to Sow: Risk Preferences and Technology Adoption Decisions of Cotton Farmers in China," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1386-1403, October.
    2. Antle, John M., 1983. "Incorporating Risk In Production Analysis," 1983 Annual Meeting, July 31-August 3, West Lafayette, Indiana 279106, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Dote, Grace, 1985. "Economic Research Of Interest To Agriculture, 1982-1984," Economic Research of Interest to Agriculture 7290, University of California, Berkeley, Department of Agricultural and Resource Economics.
    4. Elaine Meichen Liu, 2008. "Time to Change What to Sow: Risk Preferences and Technology Adoption Decisions of Cotton Farmers in China," Working Papers 1064, Princeton University, Department of Economics, Industrial Relations Section..

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