Estimation and simulation of industry factor demand equations

A factor demand model derived from the Generalized Leontief Cost Function is outlined. The model is estimated for 53 U.S. industries which together make up the entire U.S. economy. The purpose of the model is to provide long-run forecasts of equipment investment and labor productivity within the context of an input-output forecasting model. Extensive discussion is devoted to selection of functional form, modeling of dynamics, and estimation technique, with special emphasis upon the considerations which uniquely confront the forecaster. An array of a priori constraints are imposed upon the estimation, reflecting a body of empirical evidence and theoretical requirements. In addition, elasticity estimates are reported, as well as evidence on the short-run simulation performance of the mode.