We address the long standing question of whether production factors are paid their marginal products. We propose a new approach that circumvents the need to specify production functions and to compare marginal products to factor payments. Our approach is based on a simple equation that directly...

A necessary and sufficient condition for an input to be inferior is that, taking into account the input adjustment, an increase of its price raises the marginal productivity of all inputs. Contrary to a widespread opinion, it is not necessary that (some) inputs are rivals (i.e., that some...

We consider a model of production with a continuum of linear techniques and examine the related choice of technique and shape of the demand for capital schedule. The primary conclusion regards the possibility of a decreasing demand for capital schedule combined with reswitching and reverse...

We derive and empirically apply an input-oriented distance function based on the stochastic ray production function suggested by L¨othgren (1997, 2000). We show that the derived ray-based input distance function is suitable for modeling production technologies based on logarithmic functional...