A Demand System for Input Factors when there are Technological Changes in Production
In a system with n input factors there are n − 1 independent cost shares. An often-used approach in estimating factor demand systems is to (implicitly or explicitly) assume that there is a (independent) cointegrating relationship for each of the n − 1 independent cost shares. However, due to technological changes there might not be as many cointegrating relationships as there are (independent) cost shares. The paper presents a flexible demand system that allows for both factor neutral technological changes as well as technological changes that affect the relative use of the different factors. The empirical tests indicate that there are fewer cointegrating relationships than usually implied by using conventional estimation approaches. This result is consistent with technological changes. I argue that since such unexplained technological changes are likely to affect input factor decisions, a demand system that allows for such changes should be preferred.
|Date of creation:||Sep 2008|
|Date of revision:|
|Contact details of provider:|| Postal: P.O.Box 8131 Dep, N-0033 Oslo, Norway|
Phone: (+47) 21 09 00 00
Fax: +47 - 62 88 55 95
Web page: http://www.ssb.no/en/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jurgen A. Doornik, 1998.
"Approximations To The Asymptotic Distributions Of Cointegration Tests,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 12(5), pages 573-593, December.
- Doornik, Jurgen A, 1998. " Approximations to the Asymptotic Distributions of Cointegration Tests," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 573-93, December.
- Saikkonen, Pentti & L tkepohl, Helmut, 1999.
"Local Power Of Likelihood Ratio Tests For The Cointegrating Rank Of A Var Process,"
Cambridge University Press, vol. 15(01), pages 50-78, February.
- Saikkonen, Pentti & Lütkepohl, Helmut, 1997. "Local power of likelihood ratio tests for the cointegrating rank of a VAR process," SFB 373 Discussion Papers 1997,58, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Håvard Hungnes, 2005. "Identifying Structural Breaks in Cointegrated VAR Models," Discussion Papers 422, Statistics Norway, Research Department.
- Arvid Raknerud & Terje Skjerpen & Anders Swensen, 2007.
"A linear demand system within a seemingly unrelated time series equations framework,"
Springer, vol. 32(1), pages 105-124, April.
- Arvid Raknerud & Terje Skjerpen & Anders Rygh Swensen, 2003. "A linear demand system within a Seemingly Unrelated Time Series Equation framework," Discussion Papers 345, Statistics Norway, Research Department.
- Slade, Margaret E., 1989. "Modelling stochastic and cyclical components of technical change : An application of the Kalman filter," Journal of Econometrics, Elsevier, vol. 41(3), pages 363-383, July.
- J.-F. Richard, 1980.
"Models with Several Regimes and Changes in Exogeneity,"
Review of Economic Studies,
Oxford University Press, vol. 47(1), pages 1-20.
- RICHARD, Jean-François, . "Models with several regimes and changes in exogeneity," CORE Discussion Papers RP 392, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Allen, Chris & Urga, Giovanni, 1999. "Interrelated Factor Demands from Dynamic Cost Functions: An Application to the Non-energy Business Sector of the UK Economy," Economica, London School of Economics and Political Science, vol. 66(263), pages 403-13, August.
- Rainer Klump & Peter McAdam & Alpo Willman, 2007. "The long-term sucCESs of the neoclassical growth model," Oxford Review of Economic Policy, Oxford University Press, vol. 23(1), pages 94-114, Spring.
- Abadir,Karim M. & Magnus,Jan R., 2005. "Matrix Algebra," Cambridge Books, Cambridge University Press, number 9780521537469, December.
- Harbo, Ingrid, et al, 1998. "Asymptotic Inference on Cointegrating Rank in Partial Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 388-99, October.
- repec:cup:cbooks:9780521822893 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:556. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (L MaasÃ¸)
If references are entirely missing, you can add them using this form.