Seminar （Dept. of Trade Economics）

Theme： Production Function Estimation for Multi-product Firms

Speaker：Zhiyuan Chen (Renmin University of China)

Time：2020-09-28 14:00

Address：Room 1007, Mingde Business Building

Language：Chinese/English

ABSTRACT：

We study a stylized model of multi-product firms with firm-product level heterogeneity in Hicks-neutral production technology. The productivity process allows flexible correlation between the production efficiency of different products. We characterize the empirical content and show that the scale and location of the production function are non-parametrically non-identified without observing the allocation of inputs and exogenous input price variations. Based on the model’s empirical content, we develop an estimation strategy for any parametric family of production functions. In the case of Cobb-Douglas production function, we show the optimal input allocation rules can be solved in closed form and the corresponding moment conditions identify the production functions. Monte Carlo evidence shows that our identification strategy performs well. We then apply our methodology to a sample of agricultural goods manufacturing firms and show that multi-product firms’ production technologies differs from single-product firms even for the same product. We also find that multi-product firms produce its core (peripheral) products at higher (lower) technical efficiency than single-product firms. Lastly, we find a strong positive co-movement between the productivity shocks of different product lines.