Production is at the core of any discussion involving economic exchange. As we develop models of production, the fundamental start is the characterization, specification, and estimation of a production technology. Modeling the production process involves making decisions on how to summarize inputs and outputs into variables that still embody the robust interplay between input–output and input–input relationships, while still being tractable in application. There are many frameworks to empirically address production frameworks. This chapter revisits the classic concepts and frameworks to econometrically estimate production technology and then focuses on recent innovations that address the endogeneity issues embedded in production decision making when estimating a production function.
JEL classifications: B23, C21, C22, D21