Title: Aggregate Production Functions and Types of Technical Progress: A Statistical Analysis
Abstract: The problem of estimating the rate and type of technical progress continues to be a major concern to economists. One of the difficulties encountered is that of accurate specification both of the aggregate production function and of the type of technical progress. There are different specifications of the production function and there are different assumptions regarding the way technological advance changes the production function. In recent work the type of production function most commonly applied is the CES function. We refer specifically to the works of Arrow, et al. [1], David, et al. [3], Domar [5], Dhrymes [6], Kendrick and Sato [8], and Jorgenson and Griliches [7]. With regard to technology, exogenous or endogenous forms may be assumed. In the exogenous case which we wish to examine in this paper, it has been customary for reasons of theoretical and technical convenience to assume usually in the sense of Hicks or Harrod. However, as we have shown in a theoretical paper on this subject, a number of other types of are possible and plausible (Sato and Beckmann [10]). By we mean the neutrality of the effects of technical change, that is to say, relationships between certain economic variables are invariant under technical change [10, p. 57]. A further complication arises from the fact that these problems of specification of the form of a production function and the form of technical progress are not independent, for some forms of a production function necessarily preclude some types of technical progress. For other types of production functions certain distinctions do not arise. Consider, for example, the case of a production function of the Cobb-Douglas type. Technological change can shift the production function in any of a variety of ways, including changing the coefficients of labor and capital. But if technical change is not to change these coefficients, the change must enter multiplicatively and thus be either Hicks-neutral or Harrod-neutral (or their combination-factor-augmenting technical progress), but there is no way of distinguishing the two types. In other cases shown below, the choice of a specific form of a production function necessarily excludes certain types of technical progress. But the main point is that, in picking the type of technical progress, there is no reason to concentrate solely on the standard (Hicks and Harrod) forms of technical progress. There are many other meaningful types of neutral technical progress. In our article [10] already referred to we have systematically studied the problems mentioned above from a theoretical point of view. The paper discusses the close connection between the form of a production function in general and the type of technical progress of exogenous type, that would be consistent with a * The authors are both professors of economics at Brown University. They wish to acknowledge the assistance of Diplomvolkswirt Lothar Weinert in performing the regressions. This work was in part supported by the National Science Foundation.
Publication Year: 1969
Publication Date: 1969-01-01
Language: en
Type: article
Access and Citation
Cited By Count: 48
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot