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From |
Prabal De <hereisprabal@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: AW: RE: levpet for service sector firms |

Date |
Tue, 27 Oct 2009 15:49:13 -0400 |

Thanks. To be precise, I wanted to know if researchers have used intermediate inputs other than customary ones such as fuel and material in estimating mfg sector input. 1. Data is from Indian firms from a database called PROWESS. Unfortunately, to my knowledge, this is available mostly in India. 2. Yes, I am taking the value-added route to the levpet procedure (too many investment data is missing to implement Olley-Pakes) 3. Capital is owned by firm as reported by the firm in their balance sheet. There is no financial firms. 4. I am thinking about how to include the leased capital for the service sector. I have to dig up the documentation. Thanks very much for this suggestion. Am I right in being convinced that not much TFP estimation has been done for the service sector? Regards, Prabal On 10/27/09, Austin Nichols <austinnichols@gmail.com> wrote: > Prabal De <hereisprabal@gmail.com> : > Still no mention of how capital is measured, nor how output is > measured--are you using the "value-added" outcome mentioned in > http://www.stata-journal.com/sjpdf.html?articlenum=st0060 by any > chance, subtracting off "a bunch of other cost items" representing > intermediate goods? Are you using book value of capital? Owned by > the firm? No mention of depreciation, but it's probably on the data. > Perhaps property/plant/equipment (PPE) is more often owned in > manufacturing but leased in service sectors, and you are disregarding > leased capital; what country's data are you using? These details are > especially important in what is `essentially an "accounting" > procedure.' You will often be better off with OLS than with a weak IV > strategy... > > On Tue, Oct 27, 2009 at 3:14 PM, Prabal De <hereisprabal@gmail.com> wrote: >> Dear All, >> Thanks a lot for your engaged response, I really appreciate. I did >> not elaborate because I thought there are some obvious references that >> I am missing. It turns out that it is unlikely to be true. >> >> I agree with most of the concerns (definition of capital, TFP increase >> vs. mark up increase, finished goods as intermediates). I don't think >> the extant literature deal very precisely with these, mostly due to >> data limitations, at least in developing countries. Now I also agree >> with Nick that some if not all are relevant for mfg firms. Questions >> are 1)how do parameters differ if we use the same functions and same >> definitions of variables for mfg and service firms and 2) how do >> parameters differ if we have different definitions of variables and 3) >> should we use different definitions of variables? >> >> I disagree with one aspect of Nick's example. While certain natural >> phenomena like growth of trees can be exactly measurable, things like >> capital stock are more elusive. >> >> My data comes from balance sheets of firms. Hence it has sales, >> assets, wage bill, capital stock, investments, fuel, material and a >> bunch of other cost items. No plant level information. >> >> Thanks again for taking your time to engage in this. >> Best, >> Prabal >> >> On 10/27/09, Nick Cox <n.j.cox@durham.ac.uk> wrote: >>> Thanks for this. Perhaps my question was too cryptic, but I don't see an >>> answer here, or elsewhere in this thread. I can fit power functions to >>> raspberry bushes and redwood trees and I am not surprised that the >>> variables' values differ and possibly the parameter values too. But I >>> don't need different software in the two cases. The equations are the >>> same. What differs in your case? >>> >>> Nick >>> n.j.cox@durham.ac.uk >>> >>> Prabal De >>> >>> My Bad. It does stand for Total Factor Productivity which is >>> contribution of the 'residual term' A after factoring out >>> contributions of labor and capital in a production function. For a log >>> Cobb-Douglas production function >>> >>> logY = logA + (alpha)logL + (1-alpha)logK >>> >>> Nick: >>> Since this is essentially an "accounting" procedure, TFP will be >>> mechanically high if you have low labor and capital. And >>> Levinsohn-Petrin procedure controls for endogeneity in capital stock >>> by instrumenting with intermediate inputs like fuel. >>> Now intuitively, for service sector firms both physical capital and >>> fuel are much less important. Then one argument is that they DO have >>> very high TFP. I haven't found a logic contrary to this myself except >>> toying with other intermediate inputs like communication expenses(nor >>> any reference), but then there are smarter economists around and in >>> Statalist. I still hope someone can shed more light on this issue. >>> >>> On 10/27/09, Martin Weiss <martin.weiss1@gmx.de> wrote: >>>> >>>> Prabal may also want to let statalisters know what "TFP" stands for... >>> Let >>>> me guess: "Total Factor Productivity"? >>>> >>>> As far as I can tell, not even the -rather comprehensive- article >>>> introducing -levpet- >>>> http://www.stata-journal.com/sjpdf.html?articlenum=st0060 mentions >>> this >>>> term.... >>> >>> Nick Cox >>> >>>> Just curious, as I only understand some of this and it's not my field: >>>> why do different numbers require a different logic? >>> >>> Prabal De >>> >>>> I am trying to estimate a production function for service sector >>>> firms using <levpet>. However, the usual method for manufacturing >>>> sector is giving very high TFPs as naturally the service sector firms >>>> use less physical capital. Is there is variation of the levpet >>>> procedure for service sector firms? >>> >>> * > > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**st: levpet for service sector firms***From:*Prabal De <hereisprabal@gmail.com>

**st: RE: levpet for service sector firms***From:*"Nick Cox" <n.j.cox@durham.ac.uk>

**Re: st: AW: RE: levpet for service sector firms***From:*Prabal De <hereisprabal@gmail.com>

**RE: st: AW: RE: levpet for service sector firms***From:*"Nick Cox" <n.j.cox@durham.ac.uk>

**Re: st: AW: RE: levpet for service sector firms***From:*Prabal De <hereisprabal@gmail.com>

**Re: st: AW: RE: levpet for service sector firms***From:*Austin Nichols <austinnichols@gmail.com>

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