ESTIMATING CAPITAL EFFICIENCY SCHEDULES WITHIN PRODUCTION FUNCTIONS

International Capital Flows and World Production Efficiency

We develop a tractable two-country overlapping-generations model with domestic financial frictions and show that cross-country differences in financial development explain three recent empirical patterns of international capital flows. In our model, domestic financial frictions create two distinct distortions on the interest rates and production efficiency in the less financially developed coun...

Punishment Schedules for Capital Flight

W HAT are appropriate penalties to discourage capital flight? Economic punishments can serve as effective deterrents for economic crimes but the penalties themselves are often costly to impose and enforce. Good public policy must take these costs into account in addition to the effectiveness of punishment schemes. In order to construct a deterrent to economically motivated behaviour, the enviro...

Estimating Production Functions with Heterogeneous Firms

We present a new approach to the estimation of production functions that allows for richer patterns of firm heterogeneity than can be accommodated under the proxy variable methods of Olley and Pakes (1996) and Levinsohn and Petrin (2003). In particular, we show that the economics of the firms static input choice contains the necessary identifying information to control for the endogeneity probl...

Capital Precommitment and Competition in Supply Schedules

Growth, Capital Shares, and a New Perspective on Production Functions

Standard growth theory implies that steady-state growth in the presence of exponential declines in the prices of computers and other capital equipment requires a Cobb-Douglas production function. Conventional wisdom holds that capital shares are relatively constant, so that the Cobb-Douglas approach might be a good way to model growth. Unfortunately, this conventional wisdom is misguided. Capit...