Yingyao Hu, Guofang Huang, Yuya Sasaki
We introduce a new command, robustpf, to estimate parameters of Cobb–Douglas production functions. The command is robust against two poten- tial problems. First, it is robust against optimization errors in firms’ input choice, unobserved idiosyncratic cost shocks, and measurement errors in proxy variables.
In particular, the command relaxes the conventional assumption of scalar unob- servables. Second, it is also robust against the functional dependence problem of static input choice, which is known today as a cause of identification failure. The main method is proposed by Hu, Huang, and Sasaki (2020, Journal of Economet- rics 215: 375–398).
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