Abstract
The results of an experimental evaluation of the performance of neoclassical models, using alternative indexes of the pace of introduction of innovations to measure the effects of technical change on the patterns of factor input usage, are reported. The analysis maintains that production processes should be viewed as engineering activities, so that neoclassical characterizations of them and of any innovations to them are best treated as approximations. Two large-scale process analysis models provide the description of the “true” production technology with and without access to six specific process innovations. The analysis considered both input aggregation and the index of the extent of technical innovation. The results suggest that indexes which are explicitly tied to the technical features of the innovations involved perform better in isolating the direction of the input effects associated with each innovation. Moreover this conclusion was found to hold with differing levels of input aggregation.
Thanks are due an anonymous referee for most constructive comments on an earlier draft of this paper. This research was partially supported by grants from the National Science Foundation (DAR-7921-805), the Mellon Foundation, and a contract with the Electric Power Research Institute.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Berndt, E. R. & Khaled, M. S.: Parametric productivity measurement and choice among flexible function forms. Journal of Political Economy 87, December 1979.
Berndt, E. R. & Wood, D. O.: Technology, prices and the demand for energy. Review of Economics and Statistics 57, August 1975.
Berndt, E. R. & Wood, D. O.: Engineering and econometric interpretations of energy-capital complementarity. American Economic Review 69, June 1979.
Binswanger, H. P.: The measurement of technical change biases with many factors of production. American Economic Review 64, December 1974.
Binswanger, H. P. & Ruttan, V. M.: Induced innovation: technology, institutions and development. Johns Hopkins, Baltimore, 1978.
Christensen, L. R., Cummings, D. & Schoech, P. E.: Econometric estimation of scale economies in telecommunications. Working Paper No. 8201, Social Systems Research Institute, University of Wisconsin, Madison, forthcoming in L. Courville, A. R. Dobell and A. de Fontenay, editors, Econometric analysis of telecommunications: Theory and applications, Vol. 1, North Holland.
Christensen, L. R., Jorgenson, D. W. & Lau, L. J.: Conjugate duality and the transcendental logarithmic production function. Unpublished paper presented at the Second World Congress of the Econometric Society, Cambridge, England, 1970.
Denny, M., Fuss, M., Everson, C. & Waverman, L.: Eastimating the effects of diffusion of technological innovations in telecommunications: the production structure of Bell Canada. Canadian Journal of Economics 14, February 1981.
Diewert, W. E.: A note on aggregation and elasticities of substitution. Canadian Journal of Economics 7, February 1974.
Hall, R. & Jorgenson, D. W.: Tax policy and investment behavior. American Economic Review 61, March 1967.
Jorgenson, D. W. & Fraumeni, B. M.: Relative prices and technical change. In Modeling and measuring natural resource substitution (ed. E. R. Berndt & B. C. Field). MIT Press, Cambridge, 1981.
Kamien, M. I. & Schwartz, N. L.: Optimal ‘induced technical change’. Econometrica 36, January 1968.
Kopp, R. J. & Smith, V. K.: Input substitution, aggregation, and engineering descriptions of production activities. Economic Letters 5, 1980 a.
Kopp, R. J. & Smith, V. K.: Measuring factor substitution with neoclassical models: an experimental evaluation. Bell Journal of Economics 11, Autumn 1980 b.
Kopp, R. J. & Smith, V. K.: The measurement of nonneutral technological change. Working Paper 81–4, University of North Carolina at Chapel Hill, January 1981.
Lopez, R. E.: The structure of production and the derived demand for inputs in Canadian manufacturing. American Journal of Agricultural Economics 62, February 1980.
Marsden, J., Pingry, D. & Whinston, A.: Engineering foundations of production functions. Journal of Economic Theory 9, October 1974.
Russell, C. S. & Vaughan, W. J.: Steel production: processes, products, and residuals. Johns Hopkins, Baltimore, 1976.
Salter, W. E. G.: Productivity and technical change. Cambridge University Press, Cambridge, 1960.
Samuelson, P. A.: Relative shares and elasticities simplified: comment. American Economic Review 63, September 1973.
Shephard, R. W.: Theory of cost and production functions. Princeton University Press, Princeton, 1970.
Smith, V. K. & Vaughan, W. J.: Strategic detail and process analysis models for environmental management: an econometric analysis. Resources and Energy 3, January 1981.
Stigler, G.: Economic problems in measuring changes in productivity. In Output, input and productivity. Princeton University Press, Princeton (NBER Income & Wealth Series), 1961.
Vaughan, W. J., Russell, C. S. & Cochrane, H. C.: Government policies and the adoption of innovations in the integrated iron and steel industry. Report prepared for the National Science Foundation, National Rand D Assessment Program under Grant No. RDA74–18148-A01. NTIS, Springfield, May 1976.
Wills, J.: Technical change in the U.S. primary metals industry. Journal of Econometrics 10, April 1979.
Zellner, A.: An efficient method of estimating seemingly unrelated regressions and tests for aggregation bias. Journal of the American Statistical Association 58. June 1962.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 1984 The Scandinavian Journal of Economics
About this chapter
Cite this chapter
Kopp, R.J., Smith, V.K. (1984). Neoclassical Modeling of Nonneutral Technological Change: An Experimental Appraisal. In: Førsund, F.R. (eds) Topics in Production Theory. Scandinavian Journal of Economics. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-07123-4_3
Download citation
DOI: https://doi.org/10.1007/978-1-349-07123-4_3
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-07125-8
Online ISBN: 978-1-349-07123-4
eBook Packages: Palgrave Business & Management CollectionBusiness and Management (R0)