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A Semi-Nonparametric Approach to Estimating ProductionFunctions When Output Prices are Unobserved

Author

Listed:
  • Dennis Epple
  • Brett Gordon
  • Holger Sieg

    (Tepper School of Business Carnegie Mellon University)

Abstract

There exists significant dispersion in output prices between firms in many industries. As a consequence the value of output is not necessarily a good measure of the quantity of output. Estimation of production functions for these types of goods is thus challenging if quantities and prices of output are not separately observed by the econometrician. This paper provides a new semi-nonparametric approach for estimating production functions which treats quantity and prices for output as latent variables. To illustrate the usefulness of the techniques we consider an application that focuses on estimating production functions for housing. The empirical analysis is based on a comprehensive database of recently built properties in Allegheny county. We find that the new methods proposed in this paper work well in the application and provide reasonable estimates for the supply of housing per unit of land and the housing production function

Suggested Citation

  • Dennis Epple & Brett Gordon & Holger Sieg, 2006. "A Semi-Nonparametric Approach to Estimating ProductionFunctions When Output Prices are Unobserved," 2006 Meeting Papers 105, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:105
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    More about this item

    Keywords

    Productivity; Production Function; Semi-nonparametric estimation;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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