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: 1130B McCarty Hall Phone: 392-1845 Ext 404 Email:cbmoss@ifas.ufl.edu
Overview: This class meets three times a week (Monday, Wednesday and Friday period 2 [8:30-9:20]). 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. Multi-Output Production and Duality: Theory and Applications (Boston: Kluwer Academic Publishers, 1995). Mas-Colell, 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 System-Wide 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).
The Production Function Defined Properties of the Production Function Law of Variable Proportions Measure of Simultaneous Input Variation: Elasticity of Scale. Readings
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): 44-56. JSTOR Syrquin, Moshe and Gideon Hollender "Elasticities of Substitution and Complementarity: The General Case." Oxford Economic Papers 34(3)(Nov 1982): 515-19. 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): 882-888. JSTOR Thompson, H. "Substitution Elasticities with Many Inputs." Applied Mathematics Letters 10(3)(May 1997): 123-27. ScienceDirect.
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): 966-74. JSTOR Gallant, A. Ronald "The Fourier Flexible Form" American Journal of Agricultural Economics 66(2)(May 1984): 204-8. JSTOR Kmenta, J. "On Estimation of the CES Production Function" International Economic Review 8(2)(Jun 1967): 180-9. JSTOR McCarthy, Michael D. "Approximation of the CES Production Function: A Comment." International Economic Review 8(2)(Jun 1967): 190-2. JSTOR Mundlak, Yair "Production Function Estimation: Reviving the Primal" Econometrica 64(2)(Mar 1996): 431-438. JSTOR
de Janvry, Alain "The Generalized Production Function" American Journal of Agricultural Economics 54(2)(May 1972): 234-37. 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 Cobb-Douglass Production Function" Econometrica 26(4)(Oct 1958): 566-78. JSTOR Hodges, Dorothy J. "A Note on Estimation of Cobb-Douglas and CES Production Function Models." Econometrica 37(4)(Oct 1969): 721-5. JSTOR Kmenta, J. "Some Properties of Alternative Estimates of the Cobb-Douglas Production Function." Econometrica 32(1/2)(Jan-Apr 1964): 183-8. 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 Cobb-Douglas with Zero Input Levels: Bootstrapping and Substitution." Applied Economics Letters 7(10)(Oct 2000): 677-9. EBSCO Mundlak, Yair and Irving Hoch "Consequences of Alternative Specifications in the Estimation of Cobb-Douglas Production Functions." Econometrica 33(4)(Oct 1965): 814-28. JSTOR Zellner, A., J. Kmenta, and J. Dreze "Specification and Estimation of Cobb-Douglas Production Function Models." Econometrica 34(4)(Oct 1966): 784-95. JSTOR
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 "Small-Sample Evaluation of Mean-Variance Production Function Estimators." American Journal of Agricultural Economics 68(3)(Aug 1986): 732-8.JSTOR Just, Richard E. and Rulan D. Pope "Stochastic Specification of Production Functions and Economic Implications." Journal of Econometrics 7(1)(Feb 1978): 67-86.ScienceDirect Just, Richard E. and Rulan D. Pope "Production Function Estimation and Related Risk Considerations." American Journal of Agricultural Economics 61(2)(May 1979): 276-84.JSTOR
Programs
Lecture VIII: Estimation of Production Functions: Fixed Effects in Panel Data PDF Notes, PowerPoint, Slides
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 Half-Normal 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 Quasi-Fixed Inputs." Applied Economics 36(15)(2004): 1655-69. EBSCOhost.
Chambers Chapter 2.1-2.2 Fuss, M. and D.L. McFadden Production Economics: A Dual Approach to Theory and Applications Amsterdam: North-Holland, 1978. Online
Diewert, W.E. "An Application of the Shephard Duality Theorem: A Generalized Leontief Production Function." Journal of Political Economy 79(3)(May-June 1971): 481-507. JSTOR
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): 43-68. JSTOR. Terrell, Dek "Incorporating Montonicity and Concavity Conditions in Flexible Functional Forms." Journal of Applied Econometrics 11(2)(Mar-Apr 1996): 179-94. JSTOR.
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): 856-8. 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): 221-30. JSTOR
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]
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]
Akridge, Jay T. "Measuring Productive Efficiency in Multiple Agribusiness Firms: A Dual Approach." American Journal of Agricultural Economics 71(1)(Feb. 1989): 116-25.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): 256-73. 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): 655-61. JSTOR Kastens, Terry L. and Gary W. Brester "Model Selection and Forecasting Ability of Theory-Constrained Food Demand Systems." American Journal of Agricultural Economics 78(2)(May 1996): 301-12. JSTOR
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
94-100
B+
90-94
B
84-90
C+
80-84
C
74-80
D+
70-74
D
64-70
E
0-64
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, 392-1575, personal and career counseling;
Student Mental Health, Student Health Care Center, 392-1171, personal counseling;
Career Resource Center, Reitz Union, 392-1601, career development assistance and counseling.
Sexual Assault Recovery Services (SARS), Student Health Care Center, 392-1161, 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 6C1-4.017)." (http://www.dso.ufl.edu/studentguide/studentrights.php).
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