Arbeitspapier
On input market frictions and estimation of factors demand
In this paper we explore the impact of imperfectly competitive input markets on production function estimation. First order profit maximizing conditions are altered when frictions in input markets cause the elasticity of input supply to the firm to be finite. A consequence of this is that the standard econometric model used for production function estimation will be misspecified. We prove that, in all non trivial cases, finite elasticities of supply to the firm will lead to inconsistent estimates of production function parameters. Monte Carlo simulations show that the resulting bias can be economically significant.
- Language
-
Englisch
- Bibliographic citation
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Series: IZA Discussion Papers ; No. 5881
- Classification
-
Wirtschaft
Monopsony; Segmented Labor Markets
Labor Demand
- Subject
-
input market frictions
labor market frictions
estimation of factor demand
- Event
-
Geistige Schöpfung
- (who)
-
Dupuy, Arnaud
Sorensen, Todd
- Event
-
Veröffentlichung
- (who)
-
Institute for the Study of Labor (IZA)
- (where)
-
Bonn
- (when)
-
2011
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Dupuy, Arnaud
- Sorensen, Todd
- Institute for the Study of Labor (IZA)
Time of origin
- 2011
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