Abstract
This paper reports estimates of factor substitution, technical change, and returns to scale for three Canadian industries, pulp and paper, sawmills and shingle mills, and logging, using annual data from 1963 to 1982. Each industry's input-demand functions slope down and are inelastic. Factor substitution is not rejected in any of the industries but it is not large. Sawmills and shingle mills show moderate increasing returns to scale, while logging and pulp and paper show very large increasing returns to scale. The technology of the industries is nonhomothetic and cost savings as a result of changes in scale are made mostly on the capital and labour inputs. Technical change is nonneutral, capital using, and labour saving in all industries. Negative technical change is estimated for sawmills and shingle mills and pulp and paper so that all of the productivity gains made over the period of the sample are associated with changes in scale rather than the passage of time. The technical change in all industries is labour saving enough that labour becomes more productive over time, holding everything else constant.
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