Abstract
This study proposes a method for testing the induced innovation hypothesis using a cointegrating regression model. An error correction model of the share equations derived from a translog cost function model is used for the estimation. Cointegration among the variables ensures the existence of the innovation possibility curve. An error correction term of the model represents the technological change process. A difference in the elasticities of factor substitution along the isoquant curve and the innovation possibility curve implies the induced technological innovation. An empirical application is also carried out using time-series data of rice production in Japan. JEL Classification Numbers: O33, Q10, C32.
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