Proxy Variable Estimation of Multiproduct Production FunctionsJEL codes

Authors

Emir Malikov, University of Nevada, Las VegasFollow
Gudbrand Lien, Inland Norway University of Applied Sciences

Document Type

Article

Publication Date

4-14-2021

Publication Title

American Journal of Agricultural Economics

First page number:

1

Last page number:

25

Abstract

Productivity studies that use proxy variable estimators routinely specify single-output production functions despite most firms producing multiple outputs. This is usually accomplished by aggregating the firm's outputs using total revenue. Such a formulation rarely provides an adequate representation of the multiproduct firm's production: (a) it cannot identify technological cross-output trade-offs along the production possibilities frontier, and (b) it unrealistically assumes perfect output substitutability that, if misspecified, produces biased estimates. We develop a new methodology for estimating multiproduct production functions that addresses these limitations without requiring information beyond that which is available in most datasets and showcase it on Norwegian dairy-and-beef farming.

Keywords

B-splines; Dairy and beef; Endogeneity; Multiple outputs; Production function; Proxy variable; Sieve estimation; Structural identification

Disciplines

Agricultural Economics | Agriculture | Life Sciences

Language

English

Repository Citation

Malikov, E., Lien, G. (2021). Proxy Variable Estimation of Multiproduct Production FunctionsJEL codes. American Journal of Agricultural Economics 1-25.
http://dx.doi.org/10.1111/ajae.12215