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

Peeters, H.M.M. (1997): The (mis-)specification of production costs in production smoothing models. Published in: Economics Letters No. 57 : pp. 69-77.

Abstract

Estimation results obtained with production smoothing models are often imprecise and sensitive to normalisation rules. It is argued 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.

• Item Type: MPRA Paper
• Language: English
• Keywords: inventories; production smoothing model; factor demand; investment; labour; production factors; econometric modeling
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting; Fixed Investment and Inventory Studies; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital

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