Many studies of producer behavior consider cost and input demand functions derived from microeconomic theory and estimate them on the basis of aggregate data. If the characteristics of the firms differ, the negligence of heterogeneity can lead to estimation bias. An alternative is to restrict...

This article provides a review of the recent literature in production analysis. The original contribution of this synthesis is to adopt the concept of virtual prices. Applied to nonlinear and intertemporal optimization problems, the framework of virtual prices is useful to retrieve properties of...

This study presents an application of the Generalized Error Correction Model (GECM) for heterogeneous factor demands based on the quadratic cost function., Using data for 26 West German manufacturing industries over the period 1976-1995, it turns out that less general specifications such as the...