Abstract
The literature on dynamic duality relationships for infinite-horizon control problems has grown considerably (Benveniste and Scheinkman, Chambers and Lopez, Cooper and McLaren, Epstein, Epstein and Denny, McLaren and Cooper). Given adjustment cost models of the firm with static price expectations similar to Epstein, recent studies have estimated systems of dynamic factor demands in agriculture (Howard and Shumway 1988, Howard and Shumway 1987, Taylor and Monson, Vasavada and Ball, Vasavada and Chambers). Based on alternative-or nonexistent-assumptions about technology expectations, time is often included as an exogenous variable to reflect technical change. While Vasavada and Chambers correctly point out that alternative expectations mechanisms are essentially ad hoc, a chosen expectations framework affects the basic structure of the theoretical model, which, in turn, has implications for the technical change component in the dynamic factor demands. The purpose of this comment is to explore problems with the approaches used in the literature to incorporate technical change into empirical dynamic factor demand models. Some simple alternatives are also discussed. Because the Hamilton-
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