The (mis-)specification of production costs in production smoothing models

Peeters, HMM
(1997) Economics Letters — Vol. 57, n° 1, p. 69-77 (1997)

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  • Peeters, HMM
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Abstract
Estimation results obtained with production smoothing models are often imprecise and sensitive to normalisation rules. It is argued here that production costs in these models can be better specified in terms of production factor costs. The resulting (factor demand) model with inventories leads to more efficient estimation results and normalisation rules become even redundant. Furthermore, the (smoothing) role of inventories with respect to production factors is discussed. (C) 1997 Elsevier Science S.A.
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Peeters, H. (1997). The (mis-)specification of production costs in production smoothing models. Economics Letters, 57(1), 69-77. https://doi.org/10.1016/S0165-1765(97)81882-4 (Original work published 1997)