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Productivity accounting for separable technologies

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Abstract

This paper develops a method for decomposing total factor productivity growth in separable production technologies and uses it to examine the role of pest-damage prevention on agricultural productivity. The rate of technical change is decomposed into output-enhancing and damage-preventing components. Growth accounting cannot provide separate estimates of these two components of technical change, and instead a parametric model is developed based on the dual cost function. The proposed model captures both components of technical change, properly accounts for environmental effects, and also accommodates the presence of capacity utilization and scale biases. The empirical application of the model is to a sample of Cretan olive-oil producers, and the results show that output-enhancing technical change is more important than damage-preventing technical change in explaining observed total factor productivity (TFP) changes. The second largest source of TFP growth is due to the scale effect.

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Notes

  1. In a slightly different context, this specification can also be interpreted as a stochastic frontier model. In particular if it is assumed that g(x, b, t) measures the extent of technical efficiency then the so called inefficiency-effect model results. By varying the formulation of g(x, b, t), one can distinguish between neutral (Battese and Coelli 1995) and non-neutral (Huang and Liu 1994) stochastic frontier models.

  2. In that sense (1) may be viewed as what Basu et al. (2006) have referred to as purified technology change.

  3. Crete is one of the larger olive-oil producing areas in Greece accounting approximately for 40 % of total national production.

  4. We follow the same approach for the spraying equipment used as a quasi-fixed damage control input.

  5. We did not have the necessary information to estimate a capital services series. By using capital stock instead of capital services we tend to overestimate TFP growth.

  6. It is a standard practice among European olive-growers to monitor adult olive-fruit fly populations using McPhail traps are baited with sex pheromone and ammonium bicarbonate.

  7. Note that this version of the translog form is obtained by specifying a translog cost function for \(c(w,\tilde{y},K,t)\) and then making the substitution \(\tilde{y}=y/g(\bullet)\) where y is observed output.

  8. Accordingly, \(1-g(\cdot)\) is the output damage function originally suggested by Fox and Weersink (1995).

  9. We would like to thank an anonymous reviewer for detecting and pointing out to us an error in our earlier approach to performing this instrumental variables regression.

  10. One interpretation of this procedure is to provide a series approximation using the leading terms in a Taylor series expansion of the conditional moments of independent variables given the instruments used (McFadden and Ai 1997).

  11. Summary statistics for these variables are also given in Table 1.

  12. Our estimates for output enhancing technical change were derived by invoking Ohta’s equality for our estimated cost function, while the rate of preventive technical change was available as a direct by-product of our estimation of the damage-control function \(g(\cdot)\).

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Acknowledgments

This research has received funding from the European Community’s Seventh Framework Programme [FP 7/2008-2011] under Grand Agreement Number 212120. An earlier version of this paper was presented at the XIII EAAE Congress, Zurich, 2011 and in VII NAPW, Houston, 2012.

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Authors and Affiliations

  1. Department of Agricultural and Resource Economics, University of Maryland, College Park, MD, USA

    Robert G. Chambers

  2. University of Western Australia, Perth, Australia

    Robert G. Chambers

  3. Department of Economics, University of Macedonia, Thessaloniki, Greece

    Giannis Karagiannis

  4. Department of Economics, School of Social, Economics and Political Sciences, University of Crete, Rethymno, Greece

    Vangelis Tzouvelekas

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  1. Robert G. Chambers
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  2. Giannis Karagiannis
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  3. Vangelis Tzouvelekas
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Correspondence to Robert G. Chambers.

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Chambers, R.G., Karagiannis, G. & Tzouvelekas, V. Productivity accounting for separable technologies. J Prod Anal 41, 41–50 (2014). https://doi.org/10.1007/s11123-013-0367-6

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