Microeconomic and Econometric Production Analysis

Knowledge about production technologies and producer behavior is important for politicians, managers, business organizations, government administrations, financial institutions, the EU, and other national and international organizations who desire to know how contemplated or implemented policies and market conditions (e.g., world market prices) can affect production, prices, income, resource utilization, and the environment in agriculture as well as in other industries. The same knowledge is relevant for consulting single firms that want to compare themselves with other firms and the "best practice", whilst taking into account the uncertainty in the data and in the results. The participants of this course will obtain relevant qualifications in econometric production analysis so that they can contribute to the knowledge about production technologies and producer behavior. Knowledge of production economical facts is also of importance in economic consultancy for farmers and other firms.

This is an applied course that focuses on practical and empirical applications based on microeconomic production theory. The course will cover, for instance, following topics:

• advanced microeconomic production theory, for instance production functions; distance functions; cost minimization and cost functions; profit maximization and profit functions; properties of these functions
• important indicators of production technologies, for instance elasticities of scale, elasticities of substitution
• descriptive analysis of real-world production data, for instance calculation of partial productivities and total factor productivities
• econometric estimation of, for instance, production functions, distance functions, cost functions, and/or profit functions; interpretation of the estimation results
• further analysis based on estimation results, for instance optimal firm size
• functional forms in applied production analysis such as Cobb-Douglas, Translog, etc.
• efficiency analysis using Stochastic Frontier Analysis (SFA); analyzing determinants of technical efficiencies

In the classroom exercises and homework assignments, the students will analyze production technologies using the free statistical software "R" and real-word production data sets (e.g., agricultural production, energy production). It is expected that students know the basics of "R", e.g., obtained in the MSc course "Applied Econometrics" (LOJK10272) or through self-study. Introductions to relevant "R" packages are given in the classroom exercises.