AEB 6184  Production Economics — Old Syllabus
See new materials at http://ricardo.ifas.ufl.edu/aeb6184.production/
Purpose: The purpose of this course is to introduce students to the standard theoretical and empirical models used in the investigation of firm level production decisions.
Instructor: Charles B. Moss
Office: 1175 McCarty Hall
Email: cbmoss@ufl.edu
Overview: This class meets three times a week (Monday, Wednesday and Friday period 2 [8:309:20]). Course grades will be assigned based on weekly homework, three examinations, a research proposal and class participation. Homework will be due in a week increment. Each assignment will be handed out at the beginning of each increment and will involve topics covered over that time span. The research proposal is not intended to be a completed research product. Instead, I would like the student to propose an interesting problem that can be solved using of the techniques from this course.
Textbooks: There are three primary textbooks used in this course:
Chambers, Robert G. Applied Production Analysis: A Dual Approach (New York: Cambridge University Press, 1988).
Jorgenson, Dale W. Econometrics Volume 1: Econometric Modeling of Producer Behavior (Cambridge, MA: The MIT Press, 2000).
Varian, Hal R. Microeconomic Analysis Third Edition (New York: W.W. Norton & Company, 1992).
Other books referenced in this course include:
Beattie, Bruce R. and C. Robert Taylor. The Economics of Production (New York: John Wiley & Sons, 1985).
Fare, Rolf and Daniel Primont. MultiOutput Production and Duality: Theory and Applications (Boston: Kluwer Academic Publishers, 1995).
MasColell, Andreu, Micheal D. Whinston, and Jerry R. Green. Microeconomic Theory (New York: Oxford University Press, 1995).
Shephard, Ronald W. Theory of Cost and Production Functions (Princeton, New Jersey: Princeton University Press, 1970).
Theil, Henri. The SystemWide Approach to Microeconomics (Chicago: Chicago University Press, 1980).
Background material can be found in:
Doll, John P. and Frank Orazem. Production Economics: Theory with Applications Second Edition (Malabar, Florida: Krieger Publishing Company, 1984).
Supplementary Material: To facilitate classroom discussion I have a established a teaching bulletin board at http://ricardo.ifas.ufl.edu/cgibin/YaBB/YaBB.cgi. Other materials such as lecture notes will be made available on the Internet at http://ricardo.ifas.ufl.edu/aeb6184.production/syllabus.html.
Course Outline
Production Functions
Lecture I: Basic Notions of Production Functions PDF Notes , PowerPoint, Slides, Mathematica Notebook
The Single Input Production Function
The Multiple Input Production Function
Readings
Beattie and Taylor Chapter 2
Lecture II: Definitions and Properties of the Production Function PDF Notes , PowerPoint, Slides
The Production Function Defined
Properties of the Production Function
Law of Variable Proportions
Measure of Simultaneous Input Variation: Elasticity of Scale.
Readings
Chambers Chapter 1
Varian Chapter 1
MasColell et al. Chapter 5B
Lecture III: Substituting One Input for Another in Production PDF Notes, PowerPoint, Slides, Mathematica Notebook
Elasticity of Scale and Law of Variable Proportion [Chambers 1.6]
Measures of Input Substitution [Chambers 1.7]
Readings
Sato, Ryuzo and Tetsunori Koizumi "On the Elasticities of Substitution and Complementarity." Oxford Economic Papers 25(1)(Mar 1973): 4456. JSTOR
Syrquin, Moshe and Gideon Hollender "Elasticities of Substitution and Complementarity: The General Case." Oxford Economic Papers 34(3)(Nov 1982): 51519. JSTOR
Blackorby, Charles and R. Rober Russell "Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities." American Economic Review 79(4)(Sep 1989): 882888. JSTOR
Thompson, H. "Substitution Elasticities with Many Inputs." Applied Mathematics Letters 10(3)(May 1997): 12327. ScienceDirect.
Structure of Production Function [Chambers 1.8]
Lecture IV: Some Simple Production Mechanics PDF Notes, PowerPoint, Slides
Profit Maximization
Expansion Path
Derived Demand
Supply
Cost Minimization
Derived Demand (output conditional)
Cost Function
Marginal Cost
Readings
Varian Chapters 2,3,4
MasColell et al. Chapter 5C
Estimation of the Primal Production Function
Lecture V: Simple Estimation with Ordinary Least Squares and Nonparametric Regression PDF Notes , PowerPoint, Slides
Ordinary Least Squares
Computer Files
Nonparametric Surfaces
Readings
Halter, A.N., H.O. Carter, and J.G. Hocking "A Note on the Transcendenal Production Function." Journal of Farm Economics 39(4)(Nov 1957): 96674. JSTOR
Gallant, A. Ronald "The Fourier Flexible Form" American Journal of Agricultural Economics 66(2)(May 1984): 2048. JSTOR
Kmenta, J. "On Estimation of the CES Production Function" International Economic Review 8(2)(Jun 1967): 1809. JSTOR
McCarthy, Michael D. "Approximation of the CES Production Function: A Comment." International Economic Review 8(2)(Jun 1967): 1902. JSTOR
Mundlak, Yair "Production Function Estimation: Reviving the Primal" Econometrica 64(2)(Mar 1996): 431438. JSTOR
Data and Code
Lecture VI: Simultaneity and Other "Simple" Problems PDF Notes, PowerPoint, Slides
Simultaneity and sample selection
Zeros and other data problems
Existence of Stage III
Data
Readings
de Janvry, Alain "The Generalized Production Function" American Journal of Agricultural Economics 54(2)(May 1972): 23437. JSTOR
Griliches, Z. and Jacques Mairesse "Production Functions: The Search for Identification." NBER Working Paper No. 5067, March 1995. NBER Working Paper
Hoch, Irving "Simultaneous Equation Bias in the Context of the CobbDouglass Production Function" Econometrica 26(4)(Oct 1958): 56678. JSTOR
Hodges, Dorothy J. "A Note on Estimation of CobbDouglas and CES Production Function Models." Econometrica 37(4)(Oct 1969): 7215. JSTOR
Kmenta, J. "Some Properties of Alternative Estimates of the CobbDouglas Production Function." Econometrica 32(1/2)(JanApr 1964): 1838. JSTOR
Marschak, Jacob and William H. Andrews Jr. "Random Simultaneous Equations and the Theory of Production." Econometrica 12(3/4)JSTOR
Moss, Charles B. "Estimation of the CobbDouglas with Zero Input Levels: Bootstrapping and Substitution." Applied Economics Letters 7(10)(Oct 2000): 6779. EBSCO
Mundlak, Yair and Irving Hoch "Consequences of Alternative Specifications in the Estimation of CobbDouglas Production Functions." Econometrica 33(4)(Oct 1965): 81428. JSTOR
Zellner, A., J. Kmenta, and J. Dreze "Specification and Estimation of CobbDouglas Production Function Models." Econometrica 34(4)(Oct 1966): 78495. JSTOR
Lecture VII: Stochastic Production Functions PDF Notes, PowerPoint, Slides
Readings
Bernardo, D.J., N. Coulibaly, and G.W. Horn. "Use of a Stochastic Production Function to Evaluate the Effect of Energy Supplementation of Wheat Pasture Stocker Cattle on Production Risk." Working Paper
Buccola, Steven T. and Bruce A. McCarl "SmallSample Evaluation of MeanVariance Production Function Estimators." American Journal of Agricultural Economics 68(3)(Aug 1986): 7328.JSTOR
Just, Richard E. and Rulan D. Pope "Stochastic Specification of Production Functions and Economic Implications." Journal of Econometrics 7(1)(Feb 1978): 6786.ScienceDirect
Just, Richard E. and Rulan D. Pope "Production Function Estimation and Related Risk Considerations." American Journal of Agricultural Economics 61(2)(May 1979): 27684.JSTOR
Programs
Lecture VIII: Estimation of Production Functions: Fixed Effects in Panel Data PDF Notes, PowerPoint, Slides
Balanced Panel Dataset Excel
Sample Estimation for Homework Excel file of "clean data" and ASCI data file, Gauss Code
Readings
Hsiao, Cheng Analysis of Panel Data New York: Cambridge University Press, 1986.
Lecture IX: Estimation of Production Functions: Random Effects in Panel Data PDF Notes, PowerPoint, Slides
Lecture X: Stochastic Error Functions I: Another Composed Error PDF Notes, PowerPoint, Slides
Lecture XI: Stochastic Error Functions II: Estimation of Stochastic Frontiers
Software Links
Frontier 4.1 CEPA
Gauss Code for the HalfNormal Stochastic Frontier Model Gauss Code
Lecture XII: Empirical Applications of the Primal
Mishra, Ashok K., Charles B. Moss, and Kenneth Erickson. "Valuing Farmland with Multiple QuasiFixed Inputs." Applied Economics 36(15)(2004): 165569. EBSCOhost.
Test on Primal
Cost Functions
Lecture XIII: Definition and Properties of the Cost Function PDF Notes, PowerPoint, Slides
Readings
Chambers Chapter 2.12.2
Fuss, M. and D.L. McFadden Production Economics: A Dual Approach to Theory and Applications Amsterdam: NorthHolland, 1978. Online
Lecture XIV: Comparative Statics and Duality of the Cost Function PDF Notes, PowerPoint, Slides
Readings
Chambers 2.32.4
Lecture XV: An Application of Duality PDF Notes, PowerPoint, Slides
Readings
Diewert, W.E. "An Application of the Shephard Duality Theorem: A Generalized Leontief Production Function." Journal of Political Economy 79(3)(MayJune 1971): 481507. JSTOR
Lecture XVI: Shephard's Duality Proof: Part I PDF Notes, PowerPoint, Slides
Lecture XVII: Shephard's Duality Proof: Part II PDF Notes, PowerPoint, Slides
Estimation of Cost Functions
Lecture XVIII: Cost Functions and the Estimation of Flexible Functional Forms PDF Notes, PowerPoint, Slides
Flexible Function Forms [Chambers 5.1 and 5.2]
Fourier Function Forms
Estimation of Seemingly Unrelated Regression Models
Lecture XIX: Limits, Aggregation, and Constraints PDF Notes, PowerPoint, Slides
Limits to Flexible Functional Forms
Aggregation Issues
Imposing Restrictions
Homogeneity
Symmetry
Concavity
Readings
Chambers 5.4
Diewert, W.E. and T.J. Wales "Flexible Functional Forms and Global Curvature Conditions." Econometrica 55(1)(Jan 1987): 4368. JSTOR.
Terrell, Dek "Incorporating Montonicity and Concavity Conditions in Flexible Functional Forms." Journal of Applied Econometrics 11(2)(MarApr 1996): 17994. JSTOR.
Lecture XX: Subadditivity of Cost Functions PDF Notes, PowerPoint, Slides.
Subadditivity of Cost Functions
Economies of Scope and Scale
Readings
Evans, D.S. and J.J. Heckman "A Test for Subaddititivy of the Cost Function with an Application to the Bell System." American Economic Review 76(4)(Sept. 1986): 8568. JSTOR
Pulley, L.B. and Y.M. Braunstein "A Composite Cost Function for Multiproduct Firms With An Application to Economies of Scope in Banking." Review of Economics and Statistics 74(2)(May 1992): 22130. JSTOR
Profit Functions
Lecture XXI: Profit Functions PDF Notes , PowerPoint, Slides
Definition of the Profit Function [Chambers 4.2]
Comparative Statics of the Profit Function [Chambers 4.3]
The Profit Function and Duality [Chambers 4.4]
Test on Dual
Technical Change and Efficiency: Theory and Measurement
Lecture XXII: Measuring Productivity Change PDF Notes , PowerPoint, Slides
Measurement of Technical Change from Indirect Objective Functions [Chambers 6.2]
Divisia Indices and Technical Change [Chambers 6.3]
Total Factor Productivity [Chambers 6.4]
Lecture XXIII: Measuring Technical Efficiency PDF Notes , PowerPoint, Slides
Technical Efficiency
Data Envelope Analysis
Directed Distance Functions
Lecture XXIV: Factor Bias, Technical Change, and Valuing Research PDF Notes , PowerPoint , Slides
Mathematical Model of Technical Change
Valuing State Level Funding for Research: Results for Florida
Differential Models of Supply
Lecture XXV: Differential Models of Production: The Single Product Firm PDF Notes , PowerPoint , Slides
Overview of Differential Approach
Differential Model of Production
Lecture XXVI: Differential Models of Production: Change in the Marginal Cost and the MultiProduct Firm PDF Notes , PowerPoint , Slides
Review of Empirical Studies
Lecture XXVII: Applications in Production Economics PDF Notes , PowerPoint , Slides
Akridge, Jay T. "Measuring Productive Efficiency in Multiple Agribusiness Firms: A Dual Approach." American Journal of Agricultural Economics 71(1)(Feb. 1989): 11625.JSTOR
Brown, Randall S., Douglas W. Caves, and Lauritis R. Christensen "Modelling the Structure of Cost and Production for Multiproduct Firms." Southern Economic Journal 46(1)(Jul 1979): 25673. JSTOR
Featherstone, Allen M. and Charles B. Moss "Measuring Economies of Scale and Scope in Agricultural Banking." American Journal of Agricutural Economics 76(3)(Aug. 1994): 65561. JSTOR
Kastens, Terry L. and Gary W. Brester "Model Selection and Forecasting Ability of TheoryConstrained Food Demand Systems." American Journal of Agricultural Economics 78(2)(May 1996): 30112. JSTOR
Final Examination
Grading: Grades will be assigned based on the following weights:
Course Grade Weights
Activity  Total Points  Percent of Grade


Test 3*100  300  60 %


Research Proposal  100  20 %


Homework  75  15 %


Class Participation  25  5 %


Total  500  100 %


Grades will be assigned based on the following scale
Grading Scale
Grade  Percentage of Total Points


A  94100


B+  9094


B  8490


C+  8084


C  7480


D+  7074


D  6470


E  064


Resources Available: My office hours are Monday and Wednesday from 1:30  3:30, and Tuesday and Thursday 9:30  11:30. If these times are not convenient please make an appointment, or stop by my office. In general, I have an open door policy. If I am in my office, I encourage student interaction. Additional resources for students having personal problems or lacking clear career and academic goals, which interfere with their academic performance are available at:
University Counseling Center, 301 Peabody Hall, 3921575, personal and career counseling;
Student Mental Health, Student Health Care Center, 3921171, personal counseling;
Career Resource Center, Reitz Union, 3921601, career development assistance and counseling.
Sexual Assault Recovery Services (SARS), Student Health Care Center, 3921161, sexual counseling.
Software Use: All faculty, staff, and students of the University of Florida are required and expected to obey the laws and legal agreements governing software use. Failure to do so can lead to monetary damages and/or criminal penalties for the individual violator. Because such violations are also against University policies and rules, disciplinary action will be taken as appropriate.
Academic Honesty: "All students are required to abide by the Academic Honesty Guidelines which have been accepted by the University. The academic community of students and faculty at the University of Florida strives to develop, sustain and protect an environment of honesty, trust and respect. Students are expected to pursue knowledge with integrity. Exhibiting honesty in academic pursuits and reporting violations of the Academic Honesty Guidelines will encourage others to act with integrity. Violations of the Academic Honesty Guidelines shall result in judicial action and a student being subject to the sanctions in paragraph XIV of the Student Code of Conduct. The conduct set forth hereinafter constitutes a violation of the Academic Honesty Guidelines (University of Florida Rule 6C14.017)." (http://www.dso.ufl.edu/studentguide/studentrights.php).
Page Maintained by Charles Moss Email cbmoss@ufl.edu
Statistics by Awstats