Incorporating price-induced innovation in a symmetric generalised McFadden cost function with several outputs

Ludo Peeters and Yves Surry
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Ludo Peeters: Institute for Applied Economic Research (ITEO) - LUC - Limburg University Center
Yves Surry: Unité d'économie et sociologie rurales de rennes - INRA - Institut National de la Recherche Agronomique

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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.

Keywords: COST FUNCTION; MULTIPLE OUTPUTS; NON-JOINTNESS; PRICE-INDUCED INNOVATION; PARTIAL ADJUSTMENT; LINEAR SPLINES; new technology; numerical models; fitting; technical progress; innovation; modèle; estimation; ajustement; progres technique; industrie de l'alimentation animale (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (13)

Published in Journal of Productivity Analysis, 2000, 14 (1), pp.53-70. ⟨10.1023/A:1007843928635⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01593889

DOI: 10.1023/A:1007843928635

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