Heterogeneity in Panel Data: are There Stable Production Functions?

62 Pages Posted: 21 May 2004 Last revised: 30 Aug 2010

See all articles by Jacques Mairesse

Jacques Mairesse

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); Maastricht University - United Nations and Maastricht Economic Research Institute on Innovation and Technology (UNU-MERIT); National Bureau of Economic Research (NBER)

Zvi Griliches

(Deceased)

Date Written: June 1988

Abstract

We estimate separate productions functions for approximately 450 manufacturing firms each in France and the United States and for 850 manufacturing firms in Japan, covering the 13 year period 1967-1979, and focus on the wide dispersion in the estimated slope coefficients in all three countries. The main question asked Is: "Is this dispersion real?" Could it be just a reflection of sampling variability or is it an indication of real heterogeneity? We estimate the "true" dispersion using three different approaches: Maximum Likelihood, regressions of squares and cross-products of residuals, and Swamy's "residual" method, and try to interpret the somewhat different answers which emerge. In particular, we investigate the "reality" of the estimated heterogeneity by looking at its stability over time and by relating it to differences in capital shares and the industrial structure. We conclude that the observed heterogeneity is not "real." It is caused by some non-stable misspecification of our simple model, implying that we are unlikely to discern different but stable individual production relations in samples of this size which contain only a limited number of the economically relevant variables.

Suggested Citation

Mairesse, Jacques and Griliches, Zvi, Heterogeneity in Panel Data: are There Stable Production Functions? (June 1988). NBER Working Paper No. w2619. Available at SSRN: https://ssrn.com/abstract=430588

Jacques Mairesse (Contact Author)

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Maastricht University - United Nations and Maastricht Economic Research Institute on Innovation and Technology (UNU-MERIT)

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6211 TC Maastricht
Netherlands

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Zvi Griliches

(Deceased)

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