Estimating Production Functions of Multiproduct Firms

Nelli Valmari

No 37, ETLA Working Papers from The Research Institute of the Finnish Economy

Abstract: Despite the fact that multiproduct firms constitute a considerable share of firms and account for an even greater share of production, virtually all production function estimates are based on the assumption that firms are single-product producers. The single-product assumption is made due to lack of data on input allocation across the various product lines multiproduct firms operate. I provide a method to estimate product-level production functions without observable input allocations. The empirical application and Monte Carlo simulations show that the single-product firm assumption leads to biased parameter and productivity estimates and overestimated productivity differences between firms.

Keywords: Multiproduct firm; production function; productivity (search for similar items in EconPapers)
JEL-codes: D24 L11 L25 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2016-03-08
New Economics Papers: this item is included in nep-bec, nep-ecm, nep-eff, nep-ind, nep-pke and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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