Essays on Estimating Production Functions

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dc.contributor Aalto-yliopisto fi
dc.contributor Aalto University en Valmari, Nelli 2014-11-25T10:00:27Z 2014-11-25T10:00:27Z 2014
dc.identifier.isbn 978-952-60-5950-1 (electronic)
dc.identifier.isbn 978-952-60-5949-5 (printed)
dc.identifier.issn 1799-4942 (electronic)
dc.identifier.issn 1799-4934 (printed)
dc.identifier.issn 1799-4934 (ISSN-L)
dc.description.abstract In the first essay I estimate production functions of multiproduct firms when technologies are product-specific but inputs are observable only at the firm-level. I provide an estimation strategy that solves for the unobservable inputs while correcting for the well-known simultaneity, collinearity and omitted price problems in production function estimation. The key insights of the estimation strategy are, first, using output demand estimates in identifying the product-level input allocations and production functions, and second, using an inverse of the production function to control for endogeneity. The second essay describes the biases that arise when production functions are estimated under the standard assumption of a firm-level technology, while the true technologies are product-specific. The assumption of a firm-level technology implies that the technology parameters are identical across the various goods produced in the industry, and that a multiproduct firm produces all of its output with a single technology. To examine the implications of these simplifying assumptions, I estimate a firm-level production function on a dataset generated of an industry where two types of goods are produced with product-specific Cobb-Douglas production functions. I find that the biases in the estimated firm-level parameters are substantial even when the true product-specific technologies are very similar. The directions and the magnitudes of the biases are determined by intricate functions of the true product-specific technologies and the product scopes of the firms in the industry. The estimated productivity levels have a relatively low correlation with the true firm-level productivity levels when the firms' product scopes are heterogeneous, as they usually are. The third essay estimates the range of productivity gains achieved by information technology investments in the Finnish manufacturing sector. The contribution is to provide estimates of IT's productivity effects while accounting for some of the key characteristics of IT, i.e., that returns to IT depend on previous IT or complementary investments, come with lags, and, due to the aforementioned factors, are heterogeneous across firms and over time. I find that the productivity effects of IT range from negative to positive. For example, most firms obtain a negative productivity effect in the first year after the investment, which may be due to disruption in the production process caused by the implementation of the IT investment. Two years after the IT investment was made, most firms attain a positive productivity effect. In the third year after the investment, almost all firms gain a positive productivity effect. The estimation results suggest that the common practice of estimating a single output elasticity for an IT stock that is constructed as a linear function of the IT investments is unlikely to provide a truthful description of the productivity effects of IT. en
dc.format.extent 118
dc.format.mimetype application/pdf en
dc.language.iso en en
dc.publisher Aalto University en
dc.publisher Aalto-yliopisto fi
dc.relation.ispartofseries Aalto University publication series DOCTORAL DISSERTATIONS en
dc.relation.ispartofseries 179/2014
dc.relation.haspart "Estimating Production Functions of Multiproduct Firms", unpublished essay.
dc.relation.haspart "Misspecified Production Functions: Product- vs. Firm-level Technologies", unpublished essay.
dc.relation.haspart "Heterogeneous Productivity of Information Technology", unpublished essay.
dc.subject.classification Economics en
dc.title Essays on Estimating Production Functions en
dc.type G5 Artikkeliväitöskirja fi Kauppakorkeakoulu fi School of Business en
dc.contributor.department Taloustieteen laitos fi
dc.contributor.department Department of Economics en
dc.subject.keyword Production function en
dc.subject.keyword productivity en
dc.subject.keyword multiproduct firm en
dc.subject.keyword information technology en
dc.identifier.urn URN:ISBN:978-952-60-5950-1
dc.type.dcmitype text en
dc.type.ontasot Doctoral dissertation (article-based) en
dc.type.ontasot Väitöskirja (artikkeli) fi
dc.contributor.supervisor Toivanen, Otto, Professor, Katholieke Universiteit Leuven, Belgium
dc.opn Warzynski, Frédèric, Professor, University of Aarhus, Denmark
dc.subject.helecon production
dc.subject.helecon productivity
dc.subject.helecon information technology
dc.subject.helecon tuotanto
dc.subject.helecon tuottavuus 2014-12-08

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