Estimating production functions using energy to control for unobserved utilization

The recent production function estimators may overestimate or underestimate productivity growth due to ignoring the measurement errors caused by overcapacity. We extend the estimation procedure proposed by Ackerberg et al. (2015) by using energy to control for unobserved factor utilization. •We prop...

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Bibliographic Details
Published inEconomics letters Vol. 209; p. 110118
Main Authors Dong, Zhanyu, Ma, Hongqi, Shen, Guangjun
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.12.2021
Elsevier Science Ltd
Subjects
Energy
Estimating techniques
Mathematical functions
Measurement
Production function
Productivity
Utilization-adjusted TFP
Productivity
Utilization-adjusted TFP
D21
Energy
C23
L61
D24
Production function
L11
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Summary:The recent production function estimators may overestimate or underestimate productivity growth due to ignoring the measurement errors caused by overcapacity. We extend the estimation procedure proposed by Ackerberg et al. (2015) by using energy to control for unobserved factor utilization. •We propose an approach to estimate TFP when there is overcapacity.•The approach uses energy intensity to control for unobserved factor utilization.•The estimated TFP using our approach fits the data on Chinese steel firms better.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2021.110118