2004/24 LEM Working Paper Series

Characterizing the Production Process: A Disaggregated Analysis of Italian Manufacturing Firms

Giulio Bottazzi, Marco Grazzi, Angelo Secchi
Input and output relation, Panel data, Returns to scale

  JEL Classifications
C1, L2, L6.

This paper provides a description of the production process by comparing different frameworks in which to analyze the relations between inputs and output. The analysis is performed on a representative sample of Italian manufacturing firms. We employ both parametric and non-parametric analysis. The last allows to detect presence of heterogeneity in the way the production is carried out within each sector. We review some traditional issues in the econometrics of production function estimation and explain how some of them can be solved exploiting the cross-sectional time-series nature of data. Results of the econometric analysis show that coefficients estimates tend to be robust with respect to different models employed. Analysis of levels of labor productivity confirms presence of significant intra-sector heterogeneity which persists over time.

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