NIFK14001U Microeconomic and Econometric Production Analysis

Volume 2017/2018

MSc Programme in Agricultural Economics
MSc Programme in Environmental and Natural Resource Economics


Knowledge about production technologies and producer behavior is important for politicians, managers, business organizations, government administrations, financial institutions, the EU, and other national and international organizations who desire to know how contemplated or implemented policies and market conditions (e.g. world market prices) can affect production, prices, income, and resource utilization in agriculture as well as in other industries. The same knowledge is relevant for consulting single firms that want to compare themselves with other firms and the "best practice", whilst taking into account the uncertainty in the data and in the results. The participants of this course will obtain relevant qualifications in econometric production analysis so that they can contribute to the knowledge about production technologies and producer behavior. Knowledge of production economical facts is also of importance in economic consultancy for farmers and other firms.

This is an applied course that focuses on practical and empirical applications based on microeconomic production theory. The course will cover, for instance, following topics:

  • advanced microeconomic production theory, e.g. production functions; distance functions; cost minimization and cost functions; profit maximization and profit functions; properties of these functions
  • important indicators of production technologies, e.g. elasticities of scale, elasticities of substitution
  • descriptive analysis of real-world production data, e.g. calculation of partial productivities and total factor productivities
  • econometric estimation of production functions, distance functions, cost functions, and/or profit functions; interpretation of the estimation results
  • further analysis based on estimation results, e.g. optimal firm size
  • functional forms in applied production analysis such as Cobb-Douglas, Translog, etc.
  • efficiency analysis using Stochastic Frontier Analysis (SFA); analyzing determinants of technical efficiencies

In the classroom exercises and homework assignments, the students will analyze production technologies using the free statistical software "R" and several real-word production data sets (e.g. agricultural production, energy production). For students new to "R" a brief introduction to the relevant parts of "R" is given. Introductions to relevant "R" packages are given in the classroom exercises.


Learning Outcome

The primary objective of the course is to provide the students with relevant knowledge, practical skills, and competences in empirical microeconomic production analysis so that they are able to analyze production technologies and producer behavior with appropriate econometric methods.

After completing the course the students should be able to: 


  • Describe the primal and dual approaches in microeconomic production theory, e.g. production functions, distance functions, cost minimization and cost functions, profit maximization and profit functions, and important indicators of production technologies
  • Describe procedures in econometric production analysis based on primal and dual approaches in microeconomic theory
  • Describe approaches for efficiency analysis
  • Describe the assumptions that are required to apply the various approaches


  • Use the software package "R" for statistical data analysis
  • Apply econometric production and efficiency analysis using real-world data
  • Interpret the results of econometric production and efficiency analysis
  • Calculate and interpret important indicators of production technologies
  • Choose a relevant approach for econometric production and efficiency analysis
  • Evaluate approaches for econometric production and efficiency analysis


  • Use econometric production and efficiency analysis to investigate various real-world questions
  • Critically evaluate the appropriateness of a specific econometric production or efficiency analysis for analyzing a specific real-world question


See Absalon for a list of course literature. The course literature could be, for instance, the textbook "Applied Production Analysis - A Dual Approach" (Chambers, Cambridge University Press), lecture notes, and other material provided by the teachers.

Students need knowledge and competences in basic microeconomic production theory and applied econometrics in order to successfully participate in this course. These competences can be obtained, for instance, by attending courses LOJB10259 (Mikroøkonomi), LOJF10262 (Produktionsøkonomi), and LOJK10272 (Applied Econometrics).
The course is based on problem-based learning, dialogue teaching, and practical and empirical exercises. Microeconomic production theory is presented in lectures. To facilitate students' learning, lectures are followed by group-based exercises. These exercises are partly conducted in the classroom under guidance of the teacher and partly conducted as homework assignments. Most of the exercises are done on a pc.
  • Category
  • Hours
  • Exam
  • 1
  • Lectures
  • 36
  • Practical exercises
  • 36
  • Preparation
  • 57
  • Project work
  • 60
  • Theory exercises
  • 16
  • Total
  • 206
Continuous feedback during the course of the semester
Peer feedback (Students give each other feedback)

Students get continuous oral feedback from the teachers and/or teaching assistants during theoretical and practical class-room exercises. Student groups get peer-feedback on their homework assignments from other course participants. They get brief written feedback from the teachers on the final versions of their homework assignments that they have improved based on the peer feedback.

7,5 ECTS
Type of assessment
Oral examination, 20 min. preparation + 20 min. oral exam
Students will be asked to present their solution to one randomly selected homework assignment and to solve one randomly selected exercise. Furthermore, they are expected to answer questions regarding other topics of the course.
Only certain aids allowed

Students will get their solution to the selected homework assignment, no other aid allowed.

Marking scale
7-point grading scale
Censorship form
No external censorship
Several internal examiners

As ordinary exam

Criteria for exam assesment

The participants will get the grade "12" if they have fully achieved the intended learning outcome.