Dynamic Factor Demand Models, Productivity Measurement, and Rates of Return: Theory and an Empirical Application to the U.S. Bell System

51 Pages Posted: 23 Jan 2002 Last revised: 3 Feb 2015

See all articles by M. Ishaq Nadiri

M. Ishaq Nadiri

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Ingmar R. Prucha

University of Maryland; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: July 1989

Abstract

Prucha and Nadiri (1982,1986,1988) introduced a methodology to estimate systems of dynamic factor demand that allows for considerable flexibility in both the choice of the functional form of the technology and the expectation formation process. This paper applies this methodology to estimate the production structure, and the demand for labor, materials, capital and R&D by the U.S. Bell System. The paper provides estimates for short-, intermediate- and long-run price and output elasticities of the inputs, as well as estimates on the rate of return on capital and R&D. The paper also discusses the issue of the measurement of technical change if the firm is in temporary rather than long-run equilibrium and the technology is not assumed to be linear homogeneous The paper provides estimates for input and output based technical change as well as for returns to scale. Furthermore, the paper gives a decomposition of the traditional measure of total factor productivity growth.

Suggested Citation

Nadiri, M. Ishaq and Prucha, Ingmar R., Dynamic Factor Demand Models, Productivity Measurement, and Rates of Return: Theory and an Empirical Application to the U.S. Bell System (July 1989). NBER Working Paper No. w3041. Available at SSRN: https://ssrn.com/abstract=227479

M. Ishaq Nadiri (Contact Author)

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States
212-998-8968 (Phone)
212-995-4013 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Ingmar R. Prucha

University of Maryland ( email )

Department of Ecomics
College Park, MD 20742
United States
301-405-3499 (Phone)
301-405-3542 (Fax)

HOME PAGE: http://www.econ.umd.edu/~prucha/

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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