Economics Seminary: Model Productivity Change with a Short Run Cost Function

When?

Wednesday 12 January 2011, 16:00 to 17:00

Where?

04AD00

Open to:

Public, Staff, Students

Speaker:

Thomas Weyman Jones (Loughborough  University)

Thomas Weyman Jones (Loughborough  University)

"Model Productivity Change with a Short Run Cost Function"

Abstract

This paper is in three parts. Part 1 reviews the theory of modelling an industry’s technology by estimating the short run cost functions of firms and addresses an issue that arose at the 2010 EMEE conference at the University of Surrey by comparing strong and weak disposability properties of the input requirements set (related to the uneconomic region of the production function). A decomposition of productivity change is derived from this. Part 2 reviews methods for estimating efficiency and productivity in panel data samples and compares the consistency of results across different econometric specifications. Part 3 applies the ideas of parts 1 and 2 to a banking system of an economy with a special focus on the period following a financial crisis. We use our analytical framework to model the re-capitalization process as a requirement to hold levels of a fixed input, i.e. equity, above the long run equilibrium level, and we use a panel data set of banks in Turkey from after the financial upheaval period to analyse these ideas.