Econometrica: Nov 2015, Volume 83, Issue 6
Identification Properties of Recent Production Function Estimators
Daniel A. Ackerberg, Kevin Caves, Garth FrazerThis paper examines some of the recent literature on the estimation of production functions. We focus on techniques suggested in two recent papers, Olley and Pakes (1996) and Levinsohn and Petrin (2003). While there are some solid and intuitive identification ideas in these papers, we argue that the techniques can suffer from functional dependence problems. We suggest an alternative approach that is based on the ideas in these papers, but does not suffer from the functional dependence problems and produces consistent estimates under alternative data generating processes for which the original procedures do not.
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Supplement to "Identification Properties of Recent Production Function Estimators"
This zip file contains GAUSS program code that runs the monte-carlos required to replicate the Tables found in the manuscript.