Downloads
![Image representing the file: wp0504.pdf](/sites/default/files/output_url_files/wp0504.pdf_0.jpg)
wp0504.pdf
PDF | 250.82 KB
Cobb Douglas production function parameters are not identified from cross-section variation when inputs are perfectly flexible and chosen optimally, and input prices are common to all firms. We consider the role of adjustment costs for inputs in identifying these parameters in this context. The presence of adjustment costs for all inputs allows production function parameters to be identified, even in the absence of variation in input prices. This source of identification appears to be quite fragile when adjustment costs are deterministic, but more useful in the case of stochastic adjustment costs. We illustrate these issues using simulated production data.
Authors
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Stephen Bond
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Måns Söderbom
Working Paper details
- DOI
- 10.1920/wp.ifs.2005.0504
- Publisher
- IFS
Suggested citation
Bond, S and Söderbom, M. (2005). Adjustment costs and the identification of Cobb Douglas production functions. London: IFS. Available at: https://ifs.org.uk/publications/adjustment-costs-and-identification-cobb-douglas-production-functions (accessed: 1 July 2024).
More from IFS
Understand this issue
![Pound coins and calculator](/sites/default/files/styles/square_desktop/public/2022-09/Pound-coins-and-calculator.jpg?itok=RObU-BMX)
Kwasi Kwarteng homes in on the right problems, but solutions don’t add up
26 September 2022
![Warehouse](/sites/default/files/styles/square_desktop/public/2022-08/Warehouse.jpg?itok=B6dOFz9R)
How do firms impact inequality?
16 June 2022
![Surgery](/sites/default/files/styles/square_desktop/public/2024-02/NHS2.jpg?itok=OQb9UVp8)
The NHS waiting list: when will it come down?
29 February 2024
Policy analysis
![London](/sites/default/files/styles/square_desktop/public/2024-06/London.jpg?itok=zm-17Mfa)
The Conservatives and the Economy, 2010–24
3 June 2024
![London aerial view](/sites/default/files/styles/square_desktop/public/2024-06/London-aerial-view.jpg?itok=PTOLFicL)
A decade and a half of historically poor growth has taken its toll
3 June 2024
![Busy hospital](/sites/default/files/styles/square_desktop/public/2024-05/busy%20hospital%20feature.jpg?itok=XrpWNqyo)
The fiscal implications of public service productivity
30 May 2024
Academic research
![Working Paper Cover](/sites/default/files/styles/portrait/public/2024-05/CWP1124-Inference-for-rank-rank-regressions_Page_01.jpg?itok=iJl8Ja1B)
Inference for rank-rank regressions
28 May 2024
![Journal Article Cover](/sites/default/files/styles/portrait/public/2024-02/Fiscal%20Studies%20-%202024%20-%20%20-%20Issue%20Information_Page_1.jpg?itok=GfdQz4AB)
Understanding Society: minimising selection biases in data collection using mobile apps
2 February 2024
![Working paper cover](/sites/default/files/styles/portrait/public/2024-06/WP202428-The-impact-of%20labour-demand-shocks-when-occupational-labour-supplies-are-heterogeneous.jpg?itok=Erq9-V9O)
The impact of labour demand shocks when occupational labour supplies are heterogeneous
28 June 2024