Template-type: ReDIF-Paper 1.0
Author-Name: Stephen Bond
Author-Email: steve.bond@nuffield.ox.ac.uk
Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford
Author-Name: Måns Söderbom
Author-Workplace-Name: Centre for the Study of African Economies, Department of Economcis,
University of Oxford, and Institute for Fiscal Studies
Title: Adjustment Costs and the Identification of Cobb Douglas Production Functions
Abstract: Cobb Douglas production function parameters are not identified
from cross-section variation when inputs are perfectly flexible 
and chosen optimally, and input prices are common to all firms. 
We consider the role of adjustment costs for inputs in identifying 
these parameters in this context. The presence of adjustment costs 
for all inputs allows production function parameters to be 
identified, even in the absence of variation in input prices. 
This source of identification appears to be quite fragile when
adjustment costs are deterministic, but more useful in the case 
of stochastic adjustment costs. We illustrate these issues using 
simulated production data.
Length: 28 pages
Creation-Date:2005-01-31
Number:2005-W04
File-URL: http://www.nuff.ox.ac.uk/economics/papers/2005/W4/bsprod_jan31.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:0504