Retrieving initial capital distributions from panel data

Chen, Xi and Plotnikova, Tatiana (2014): Retrieving initial capital distributions from panel data.

Abstract

A common problem in the empirical production analysis at the firm-level is that the initial values of capital are often missing in the data. Most empirical studies impute initial capital according to some ad hoc criteria based on a single arbitrary proxy. This paper evaluates the bias of production function estimations that is introduced when these traditional initial value approximations are used. We propose a generalized framework to deal with the missing initial capital problem by using multiple proxies where the choice of proxies is data-driven. We conduct a series of Monte Carlo experiments where the proposed method is tested against traditional approaches and apply the method to the firm-level data.

• Item Type: MPRA Paper
• Language: English
• Keywords: capital stock measurement, production function estimation, Monte Carlo simulation, non-linear regression
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C19 - Other; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C81 - Methodology for Collecting, Estimating, and Organizing Microeconomic Data ; Data Access; D - Microeconomics > D2 - Production and Organizations > D20 - General

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