On Wednesday, 8 October, frim 13.00 to 14.00, there will be another session of the ISEG Research Seminars, this time with Ulrich Doraszelski (University of Pennsylvania), who will present the paper on "Production Function Estimation without Invertibility: Imperfectly Competitive Environments and Demand“.
The ISEG Research Seminars are held every week on Wednesdays in Lecture Theatre 4 of Quelhas (4th floor), with the participation of professors from ISEG and other Portuguese and international universities.
Free admission.
Abstract
We advance the proxy variable approach to production function estimation. We show that the invertibility assumption at its heart is testable. We characterize what goes wrong if invertibility fails and what can still be done. We show that rethinking how the estimation procedure is implemented either eliminates or mitigates the bias that arises if invertibility fails. In particular, a simple change to the first step of the estimation procedure provides a first-order bias correction for the GMM estimator in the second step. Furthermore, a modification of the moment condition in the second step ensures Neyman orthogonality and enhances efficiency and robustness by rendering the asymptotic distribution of the GMM estimator invariant to estimation noise from the first step.