Abstract
This paper proposes a multiple-output Symmetric Generalised McFadden (SGM) cost function, incorporating both exogenous and endogenous technological change. Whilst exogenous technological change is captured by the usual time trend, endogenous or price-induced technological change is cast within a partial-adjustment framework involving lagged input prices. The study points to various dimensions or components of technological change, and allows to disentangle “pure” factor substitution, given the state of the technology, from factor substitution due to price-induced changes in technology. Under the conditions of non-jointness in input quantities, the model further allows to identify technological change biases for each output separately. An empirical application is presented in which the proposed model is applied to time-series data on the feed manufacturing industry in Belgium. To improve on the econometrics, the SGM cost function also incorporates linear splines.
Similar content being viewed by others
References
Berndt, E., M. Fuss, and L. Wavermann. (1977). Dynamic Models of the Industrial Demand for Energy. Electric Power Research Institute. Palo Alto.
Binswanger, H.P. (1974). “The measurement of technological change biases with many factors of production.” American Economic Review 64, 964-976.
Binswanger, H.P. (1978). “Issues in modeling induced technical change.” In H. P. Binswanger and H. Ruttan (eds.), Induced Innovation: Technology, Institutions and Development. Washington, DC: The Johns Hopkins University Press, pp. 91-128.
Celikkol, P. and S.E. Stefanou. (1999). “Measuring the impact of price-induced innovation on technological progress: application to the U.S. food processing and distribution sector.” Journal of Productivity Analysis 12, 135-151.
Diewert, W.E. and T.J. Wales. (1987). “Flexible functional forms and global curvature conditions.” Econometrica 55, 43-68.
Diewert, W.E. and T.J. Wales. (1988). “A normalized quadratic semiflexible functional form.” Journal of Econometrics 37, 327-342.
Diewert, W.E. and T.J. Wales. (1992). “Quadratic spline models for producer's supply and demand functions.” International Economic Review 33, 705-722.
Fulginiti, L. (1994). “Price-conditional technology.” Journal of Agricultural and Resource Economics 19, 161- 172.
Hall, R. (1973). “The specification of technology with several outputs.” Journal of Political Economy 81, 878-893.
Hayami, Y. and V.W. Ruttan. (1970). “Factor prices and technical change in agricultural development: the United States and Japan, 1880-1960.” Journal of Political Economy 78, 1115-1141.
Kako, T. (1978). “Decomposition analysis and derived demand for factor inputs: the case of rice production in Japan.” American Journal of Agricultural Economics 60, 628-635.
Kohli, U. (1981). “Nonjointness and factor intensity in U.S. production.” International Economic Review 22, 3-18.
Kohli, U. (1993). “A symmetric normalized quadratic GNP function and the U.S. demand for imports and supply of exports.” International Economic Review 34, 243-255.
Kohli, U. (1994a). “Canadian imports and exports by origin and destination: a semi-flexible approach.” Canadian Journal of Economics 27, 580-603.
Kohli, U. (1994b). “Technological biases in U.S. aggregate production.” Journal of Productivity Analysis 5, 5-22.
Krinsky, I. and A.L. Robb. (1986). “On approximating the statistical properties of elasticities.” The Review of Economics and Statistics 68, 715-719.
Kumbhakar, S.C. (1994). “A multiproduct Symmetric Generalized McFadden cost function.” Journal of Productivity Analysis 5, 349-357.
Lasserre, P. and P. Ouellette. (1991). “The measurement of productivity and scarcity rents: the case of asbestos in Canada.” Journal of Econometrics 48, 287-312.
Lau, L.J. (1978). “Testing and imposing monotonicity, convexity, and quasi-convexity constraints.” In M. Fuss and D. McFadden (eds.), Production Economics: A Dual Approach to Theory and Applications. Volume 1. North-Holland. pp. 409-455.
Livernois, J.R. and D.L. Ryan. (1989). “Testing for non-jointness in oil and gas exploration: a variable profit function approach.” International Economic Review 30, 479-504.
Machado, F.S. (1995). “Testing the induced innovation hypothesis using cointegration analysis.” Journal of Agricultural Economics 46, 349-360.
Peeters, L. (1995). “Measuring biases of technical change: the case of cereals displacement in livestock ration formulation in Belgium.” European Review of Agricultural Economics 22, 137-156.
Peeters, L. and Y. Surry. (1993a). “An econometric approach for measuring substitution and allocation of marketable feed inputs.” VIIth European Congress of Agricultural Economists Stresa, Italy.
Peeters, L. and Y. Surry. (1993b). “Estimating feed utilisation matrices using a cost function approach.” Agricultural Economics 9, 109-126.
Rask, K. (1995). “The structure of technology in Brazilian sugarcane production, 1975-87: an application of a modified Symmetric Generalized McFadden cost function.” Journal of Applied Econometrics 10, 221-232.
Stevenson, R. (1980). “Measuring technological bias.” American Economic Review 70, 162-173.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Peeters, L., Surry, Y. Incorporating Price-Induced Innovation in a Symmetric Generalised McFadden Cost Function with Several Outputs. Journal of Productivity Analysis 14, 53–70 (2000). https://doi.org/10.1023/A:1007843928635
Issue Date:
DOI: https://doi.org/10.1023/A:1007843928635