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Title:On the identification of production functions: How heterogeneous is productivity? PDF Logo
Authors:Gandhi, Amit
Navarro, Salvador
Rivers, David
Issue Date:2011
Series/Report no.:CIBC Working Paper 2011-9
Abstract:The estimation of production functions suffers from an unresolved identification problem caused by flexible inputs, such as intermediate inputs. We develop an identification strategy for production functions based on a transformation of the firm's short-run first order condition that solves the problem for both gross output and valueadded production functions. We apply our approach to plant-level data from Colombia and Chile, and find that a gross output production function implies fundamentally different patterns of productivity heterogeneity than a value-added specification. This finding is consistent with our analysis of the bias induced by the use of value-added.
Document Type:Working Paper
Appears in Collections:CIBC Working Paper Series, University of Western Ontario

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