On the Benefits of Normalization in Production Functions

Embrey, Iain (2019) On the Benefits of Normalization in Production Functions. Working Paper. Lancaster University, Department of Economics, Lancaster.

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Abstract

A growing literature demonstrates that production function normalization yields important benefits in both empirical and theoretical macroeconomics. Yet normalization has remained notably absent from the microeconomic literature. This paper introduces the concept of normalization within the microeconomic context, and establishes that it could provide substantial improvements in the interpretability, the tractability, and the applicability of a broad class of economic production functions. Since any production function is merely a specialized interpretation of some decision-maker's utility function, our analyses also generalize to the wider context of utility functions. We therefore conclude that the benefits of normalization may be pervasive.

Item Type: Monograph (Working Paper)
Subjects:
Departments: Lancaster University Management School > Economics
ID Code: 131589
Deposited By: ep_importer_pure
Deposited On: 22 Feb 2019 11:25
Refereed?: No
Published?: Published
Last Modified: 19 Feb 2020 00:31
URI: https://eprints.lancs.ac.uk/id/eprint/131589

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