Dynamic factor demand models, productivity measurement, and rates of return: Theory and an empirical application to the US Bell System

M. Ishaq Nadiri, Ingmar R. Prucha

    Research output: Contribution to journalArticle

    Abstract

    Prucha and Nadiri (1982, 1986, 1988) introduced a methodology to estimate systems of dynamic factor demand that allows for considerable flexibility in both the choice of the functional form of the technology and the expectation formation process. This paper applies this methodology to estimate the production structure and the demand for labour, materials, capital and R and D by the US Bell System. The paper provides estimates for short-, intermediate-, and long-run price and output elasticities of the inputs, as well as estimates on the rate of return on capital and R and D. The paper also discusses the issue of the measurement of technical change if the firm is in temporary rather than long-run equilibrium and the technology is not assumed to be linear homogeneous. The paper provides estimates for input and output based technical change as well as for returns to scale. Furthermore, the paper gives a decomposition of the traditional measure of total factor productivity growth.

    Original languageEnglish (US)
    Pages (from-to)263-289
    Number of pages27
    JournalStructural Change and Economic Dynamics
    Volume1
    Issue number2
    DOIs
    StatePublished - Dec 1990

    ASJC Scopus subject areas

    • Economics and Econometrics

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