Estimating Production Functions of Multiproduct Firms

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.


JEL: D24, L11, L25
Datum: 08.03.2016
Sidar: 61
Pris: 15 €
Språk: Engelskt
ISSN: 2323-2420
ETLA Working Papers 37