THE PRODUCTION AND COST-STRUCTURE OF ISRAELI INDUSTRY - EVIDENCE FROMINDIVIDUAL FIRM DATA

The main purpose of this paper is to present estimates of production a nd cost functions obtained from using a time-series, cross-section dat a set pertaining to Israeli industry. Our primary data set is an expan ded version of the data used in Bregman, Fuss, and Regev (1991), expan ded to include 849 firms over the period 1979 to 1983 (4,245 observati ons). We include a detailed list of heterogeneity controls in the spec ifications which substantially enhances the explanatory power of the m odels and contributes to our understanding of the nature of Israeli in dustry. Econometric problems which arise in attempting to estimate pro duction and cost functions from panel data, such as sample selectivity , serial correlation due to unobserved firm effects, and endogeneity a re addressed.