TY - JOUR
T1 - A test of static equilibrium models and rates of return to quasi-fixed factors, with an application to the Bell system
AU - Schankerman, Mark
AU - Nadiri, M. Ishaq
N1 - Funding Information:
*We would like to thank Ernie Bemdt and Mel Fuss for extensive comments on earlier versions of this paper. This research was supported by the National Science Foundation, Grant PRA-8108635 and by a grant from the American Telephone and Telegraph Company.
PY - 1986
Y1 - 1986
N2 - The paper provides a statistical test to assess the adequacy of the static equilibrium framework which can be used prior to specifying a fully dynamic equilibrium model. We develop and apply this test to the production structure and factor demand equations based on the theory of restricted cost functions. This diagnostic test can also be used in other areas of applied economics, such as consumer demand and labor supply studies, where the analyst faces the choice between static and dynamic models of economic behavior. The framework is used to calculate rates of return to quasi-fixed factors, to measure the extent of over- and underinvestment in such factors, to adjust measured productivity growth for departures from static equilibrium, and to provide measures of marginal Tobin's q for individual assets that could be used to model investment functions for those assets.
AB - The paper provides a statistical test to assess the adequacy of the static equilibrium framework which can be used prior to specifying a fully dynamic equilibrium model. We develop and apply this test to the production structure and factor demand equations based on the theory of restricted cost functions. This diagnostic test can also be used in other areas of applied economics, such as consumer demand and labor supply studies, where the analyst faces the choice between static and dynamic models of economic behavior. The framework is used to calculate rates of return to quasi-fixed factors, to measure the extent of over- and underinvestment in such factors, to adjust measured productivity growth for departures from static equilibrium, and to provide measures of marginal Tobin's q for individual assets that could be used to model investment functions for those assets.
UR - http://www.scopus.com/inward/record.url?scp=0002904550&partnerID=8YFLogxK
U2 - 10.1016/0304-4076(86)90029-1
DO - 10.1016/0304-4076(86)90029-1
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AN - SCOPUS:0002904550
SN - 0304-4076
VL - 33
SP - 97
EP - 118
JO - Journal of Econometrics
JF - Journal of Econometrics
IS - 1-2
ER -