Robust Error Specification in a Production System
16 Pages Posted: 15 Apr 2020
Date Written: April 2013
Abstract
Economists estimating demand and supply systems face the question of using shares or quantities as dependent variables. This article finds that inconsistent estimates are obtained if one makes the wrong choice. A robust structure is presented to let the data choose the preferred form. Empirical applications to U.S. and Texas agriculture using the generalized method of moments suggest that shares and quantities are rejected in favor of a more general functional form. The Texas application provides some evidence for fixed capital but not for labor.
Keywords: netputs, robust estimation
Suggested Citation: Suggested Citation
Pope, Rulon D. and LaFrance, Jeffrey T., Robust Error Specification in a Production System (April 2013). American Journal of Agricultural Economics, Vol. 95, Issue 3, pp. 669-684, 2013, Available at SSRN: https://ssrn.com/abstract=3573043 or http://dx.doi.org/10.1093/ajae/aas136
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