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Incorporating Price-Induced Innovation in a Symmetric Generalised McFadden Cost Function with Several Outputs

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  • Ludo Peeters
  • Yves Surry

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. Copyright Kluwer Academic Publishers 2000

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  • Ludo Peeters & Yves Surry, 2000. "Incorporating Price-Induced Innovation in a Symmetric Generalised McFadden Cost Function with Several Outputs," Journal of Productivity Analysis, Springer, vol. 14(1), pages 53-70, July.
    • Handle: RePEc:kap:jproda:v:14:y:2000:i:1:p:53-70
    DOI: 10.1023/A:1007843928635
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    Cited by:

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    2. De Blander, Rembert & Frahan, Bruno Henry de, 2011. "Analysis of Technical and Policy Changes for Belgian Dairy Farms Using an Estimated Augmented SGM Cost Function," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114546, European Association of Agricultural Economists.
    3. Belton M. Fleisher & William H. McGuire & Xiaojun Wang & Min Qiang Zhao, 2021. "Induced innovation: evidence from China’s secondary industry," Applied Economics, Taylor & Francis Journals, vol. 53(52), pages 6075-6093, November.
    4. Wieck, Christine & Heckelei, Thomas, 2004. "Development Of Marginal Cost Distributions In Dairy Production Regions Of The Eu," 2004 Annual meeting, August 1-4, Denver, CO 19943, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Louhichi, Kamel & Jacquet, Florence & Butault, Jean Pierre, 2012. "Estimating input allocation from heterogeneous data sources: A comparison of alternative estimation approaches," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 13(2), pages 1-20.
    6. Pierani, Pierpaolo & Rizzi, Pier Luigi, 2003. "Technology and efficiency in a panel of Italian dairy farms: an SGM restricted cost function approach," Agricultural Economics, Blackwell, vol. 29(2), pages 195-209, October.
    7. Esposti, Roberto & Pierani, Pierpaolo, 2008. "Price-induced technical progress in Italian agriculture," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 89(4).
    8. K. K. Gary Wong & Belton M. Fleisher & Min Qiang Zhao & William H. McGuire, 2022. "Technical progress and induced innovation in China: a variable profit function approach," Journal of Productivity Analysis, Springer, vol. 57(2), pages 177-191, April.
    9. Aiken, Deborah Vaughn & Pasurka, Carl Jr., 2003. "Adjusting the measurement of US manufacturing productivity for air pollution emissions control," Resource and Energy Economics, Elsevier, vol. 25(4), pages 329-351, October.
    10. Kenneth Stewart, 2009. "Non-jointness and scope economies in the multiproduct symmetric generalized McFadden cost function," Journal of Productivity Analysis, Springer, vol. 32(3), pages 161-171, December.
    11. Esposti, Roberto & Pierani, Pierpaolo, 2005. "Price-Induced Technological Change in Italian Agriculture: An SGM Restricted Cost Function Approach (1951-91)," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24662, European Association of Agricultural Economists.
    12. Casasnovas, Valero L. & Aldanondo, Ana Maria, 2011. "Influence of Animal Feeding on Milk Supply in Navarre," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114316, European Association of Agricultural Economists.

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