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Modeling Technical Change: Theory and Practice

In: Handbook of Production Economics

Author

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  • Subal C. Kumbhakar

    (State University of New York at Binghamton
    Inland Norway University of Applied Sciences)

Abstract

This chapter focuses on models dealing with technical change (TC). We discuss TC under both single output and multiple outputs cases. For the single output case, we specify the technology in terms of a (i) production (input or output distance) function, (ii) cost function, and (iii) profit function. Each of these cases is discussed under disembodied approaches, which are not associated with a specific input and embodied (factor-augmenting (FA)) approaches, which are specific to input(s). In the disembodied approach, we mostly focus on time driven TC which includes models with the time trend and general index approaches. First, we discuss each of the cases in a standard neoclassical setup without technical inefficiency followed by a brief discussion of some of the models with technical inefficiency. We also discuss TC and total factor productivity (TFP) in models with good and bad outputs. Finally, we link TFP change with profitability change.

Suggested Citation

  • Subal C. Kumbhakar, 2022. "Modeling Technical Change: Theory and Practice," Springer Books, in: Subhash C. Ray & Robert G. Chambers & Subal C. Kumbhakar (ed.), Handbook of Production Economics, chapter 21, pages 871-923, Springer.
    • Handle: RePEc:spr:sprchp:978-981-10-3455-8_27
    DOI: 10.1007/978-981-10-3455-8_27
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    More about this item

    Keywords

    Technical change; Total factor productivity; Panel data; Production function; Cost function; Profit function; Distance function; Technical inefficiency;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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