Non-neutral productivity dynamics in a nonseparable production function with multiple productivity

Abstract

This paper studies the effects of different productivity on current and future period output under a nonseparable production function with multiple productivity. This model relaxes two widely used assumptions in production function literature: the parametric production function structure and one single productivity. This paper establishes a novel nonparametric identification of all the unspecified elements. Concerning estimation, this paper proposes easy-to-implement kernel estimators and shows they are consistent and asymptotically normal by the functional delta method. The model is then applied to study Spanish firms' behaviors. I find that change in current period capital productivity plays a more crucial role than change in current period Hicksian productivity on current period output. Their effects on next period output become smaller and similar. Moreover, I find such effects depend on the levels of productivity.