Lecture06-2011 - Outline Simultaneity and Estimation of the...

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Unformatted text preview: Outline Simultaneity and Estimation of the Production Function Two Models of Simultaneity Zeros in the Cobb-Douglas Simultaneity and Other Simple Problems : Lecture VI Charles B. Moss September 13, 2011 Charles B. Moss Simultaneity and Other Simple Problems : Lecture VI Outline Simultaneity and Estimation of the Production Function Two Models of Simultaneity Zeros in the Cobb-Douglas 1 Simultaneity and Estimation of the Production Function Irving Hock - Econometrica Lawrence Klein - A Textbook of Econometrics 2 Two Models of Simultaneity Empirical Setup Indirect Least Squares Solution Seemingly Unrelated Regression Formulation 3 Zeros in the Cobb-Douglas Charles B. Moss Simultaneity and Other Simple Problems : Lecture VI Outline Simultaneity and Estimation of the Production Function Two Models of Simultaneity Zeros in the Cobb-Douglas Irving Hock - Econometrica Lawrence Klein - A Textbook of Econometrics Simultaneity and Estimation of the Production Function The above discussion (and estimates) makes the experimental plot design assumption regarding the data. I essentially assumed that the data are being generated from some sort of experimental design so that the errors are truly random. If the data are actually the result of farm level decisions, the data are endogenous. Charles B. Moss Simultaneity and Other Simple Problems : Lecture VI Outline Simultaneity and Estimation of the Production Function Two Models of Simultaneity Zeros in the Cobb-Douglas Irving Hock - Econometrica Lawrence Klein - A Textbook of Econometrics Irving Hock - Econometrica Hock, Irving. 1958. Simultaneous Equation Bias in the Context of the Cobb-Douglas Production Function. Econometrica 26(4), 566-78. The basic firm-level model is that we have an empirical model under the assumption of: A Cobb-Douglas production function, and Competition. X = K Q Y q =1 X aq q P X X q = P a q X X q = P q a q X P X q P q = a q Y Y q = 1 (1) Charles B. Moss Simultaneity and Other Simple Problems : Lecture VI Outline Simultaneity and Estimation of the Production Function Two Models of Simultaneity Zeros in the Cobb-Douglas Irving Hock - Econometrica Lawrence Klein - A Textbook of Econometrics Lawrence Klein - A Textbook of Econometrics Klein demonstrates that the best linar unbiased estimate of a q is a q = I Y i =1 Y qi Y i 1 I (2) In this approach the average firm is defined to be the optimal firm. As an alternative P a X X q = R q P q (3) where R q is some constant and the investigator wishes to test whether it is equal to one. Charles B. Moss Simultaneity and Other Simple Problems : Lecture VI Outline Simultaneity and Estimation of the Production Function Two Models of Simultaneity Zeros in the Cobb-Douglas Irving Hock - Econometrica Lawrence Klein - A Textbook of Econometrics The firm sets the value of the marginal product equal to the...
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Lecture06-2011 - Outline Simultaneity and Estimation of the...

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