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Nonparametric Analysis of Separable Production Technologies with Intermediate Inputs

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  • Laurens Cherchye
  • Bram De Rock

Abstract

We introduce a nonparametric methodology for analyzing production technologies characterized by weakly separable structures involving intermediate inputs. Weakly separable production functions allow for modeling production stages where raw inputs aggregate into intermediate inputs before interacting with other factors of production. We establish nonparametric testable conditions for cost minimizing behavior that accommodate production with intermediate inputs. These conditions offer practical tools for empirical analysis of separable production processes. We show that they provide a useful basis for measuring productive efficiency and for identifying shadow prices of intermediate inputs. Additionally, we discuss potential extensions to handle jointly used raw inputs, multiple final outputs, and scenarios with limited price and quantity information.

Suggested Citation

  • Laurens Cherchye & Bram De Rock, 2024. "Nonparametric Analysis of Separable Production Technologies with Intermediate Inputs," Working Papers ECARES 2024-13, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/377052
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    References listed on IDEAS

    as
    1. Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-598, October.
    2. Laurens Cherchye & Bram De Rock & Bart Dierynck & Filip Roodhooft & Jeroen Sabbe, 2013. "Opening the “Black Box” of Efficiency Measurement: Input Allocation in Multioutput Settings," Operations Research, INFORMS, vol. 61(5), pages 1148-1165, October.
    3. repec:hal:spmain:info:hdl:2441/f0uohitsgqh8dhk9820172631 is not listed on IDEAS
    4. Färe, Rolf & Karagiannis, Giannis, 2014. "Benefit-of-the-doubt aggregation and the diet problem," Omega, Elsevier, vol. 47(C), pages 33-35.
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    7. Hanoch, Giora & Rothschild, Michael, 1972. "Testing the Assumptions of Production Theory: A Nonparametric Approach," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 256-275, March-Apr.
    8. Laurens Cherchye & Thomas Demuynck & Bram Rock & Kristof Witte, 2014. "Non‐parametric Analysis of Multi‐output Production with Joint Inputs," Economic Journal, Royal Economic Society, vol. 124(577), pages 735-775, June.
    9. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2011. "The revealed preference approach to collective consumption behavior: nonparametric testing and sharing rule recovery," ULB Institutional Repository 2013/98560, ULB -- Universite Libre de Bruxelles.
    10. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2011. "The Revealed Preference Approach to Collective Consumption Behaviour: Testing and Sharing Rule Recovery," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(1), pages 176-198.
    11. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    12. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(1), pages 99-110.
    13. Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, vol. 52(3), pages 579-597, May.
    14. Laurens Cherchye & Thomas Demuynck & Bram Rock & Kristof Witte, 2014. "Non‐parametric Analysis of Multi‐output Production with Joint Inputs," Economic Journal, Royal Economic Society, vol. 124(577), pages 735-775, June.
    15. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2011. "The Revealed Preference Approach to Collective Consumption Behaviour: Testing and Sharing Rule Recovery," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 176-198.
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    Keywords

    Nonparametric Analysis; Production Technologies; Intermediate Inputs;
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