Econometrica: Jan 1962, Volume 30, Issue 1

Estimation of Production Function Parameters Combining Time-Series and Cross-Section Data<34:EOPFPC>2.0.CO;2-8
p. 34-53

Irving Hoch

This paper is concerned with the estimation of Cobb-Douglas production function parameters by the analysis of variance, using combined time-series and cross-section data. Some theoretical development is followed by empirical results for a sample of farm firms over a period of years. Estimated marginal returns per dollar of expenditure are obtained for inputs of the "average" firm; returns to labor are below one dollar, and returns to other inputs are above one dollar. Firm constants and time constants are obtained and interpreted. There is a drop in the sum of elasticities as one moves from the usual least squares estimates to analysis of covariance estimates. Alternative explanations for this decrease are considered.

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