Econometric analysis of production functions

The production functions modelling is treated from econometric viewpoints. The class of the neo-classical production functions is described. Special attention is given to the so called CD and CES production functions. The estimates of the parameters from cross-sectional data are evaluated. Disturbance terms weakening their precision is mentioned and the possibilities of eventual corrections outlined. The economic interpretation is stressed as a most important factor in evaluating the fundamental production functions and their characteristics. The description of production functions based on time series data is given. The alternative representations evaluating the influence of technical progress are mentioned. Especially the methods of estimating the embodied and disembodied technical progress are performed. The approach using the so called proxies through the time variables is appreciated as a stimulating one. Moreover, the vintage production functions are mentioned as a useful tool when trying to project the development of separated effects of the technical progress and their future development.

Keywords: production function, marginal product, isoquants, marginal rate and elasticity of substitution, returns to scale, vintage models