A Simultaneous Equations Econometric Model for the Study of the Impact of Inventory on Factors of Production

Abstract

A simultaneous equations econometric model is specified and estimated with a generalized Cobb-Douglas production function based on three inputs namely Labour, Capital and Inventory. It is estimated by using Indirect Least Squares estimation. The impact inventory on factors of production is studied through the derived demand equations for the factors of production. Under the empirical investigation, the proposed model is estimated by using the cross section data on different industry groups in India for the year 1985-86.