Biased Technical Change Research Articles

Energy conservation, unemployment and the direction of technical change

This paper extends the model by Smulders and de Nooij (Resour Energy Econ 25:59–79, 2003), where technical change can be biased towards labour or energy, by assuming a monopolistic union and a government which pays unemployment benefits, collects wage taxes and sells emission permits. The extended model is applied to the analysis of environmental tax reforms. A reduction in the level of energy use yields a double dividend by lowering pollution and unemployment, while temporarily inducing energy-saving technical change. It moves the economy to a new balanced growth path where unemployment is permanently lower, but long-run growth is not affected. A reduction in the growth rate of energy use induces a persistent bias in technical change towards labour and reduces long-run growth.

The sector bias of skill-biased technical change and the rising skill premium in transition economies

We test the hypothesis that the sector bias of skill biased technical change is important in explaining the rising relative wage of skilled workers in the manufacturing sector in three Central and Eastern European transition countries. The econometric results broadly confirm that the concentration of skill biased technical change in the skill intensive sectors had a significant effect on the skill premium in these transition countries.

On Technical Change in the Elasticities of Resource Inputs

This article considers an economy whose production function takes both renewable and non-renewable resources as inputs. We extend the current literature by allowing for exogenous technical change in the elasticity of substitution between these two types of resources. In addition, we study the consequences of biased technical change which alters the resources' relative productivities. We derive long-run asymptotic results, which we use to compare several cases. In the benchmark case of no technical change, our results are close to those obtained by Dasgupta and Heal (1974). In the case of technical change in the elasticity of substitution, we observe that this kind of technical change helps obtain positive long-run production despite the depletion of non-renewable resources. In the biased technical change case, long-run production is only possible either if non-renewable resources are non-essential or if biased technical change is quick enough to compensate for the decreasing flow of non-renewable resources. We embed our production function in an optimal growth model and study its dynamics. As a steady state (or a balanced growth path) is only attainable as time goes to infinity, we resort to numerical simulations to convey what is happening during the short and medium run. Our results provide new considerations for the debate on natural resources. We suggest that technical change should be directed to the resource which is most important for production.

Productivity Change and the Effects of the Enhancement of the Mass Transportation Programme on the Bus Transit System in Taiwan

The main objective of this article is to analyse the changes in productivity of the Taiwan Bus Transit System (TBTS) before and after the execution of the ‘Alternatives for Promoting the Development of the Public Transportation Sectors’ (APDPTS), which is designed to provide a better operating environment for the public transport sector in the provision of public transit services. We use a decomposition of the Malmquist productivity index to locate the sources of productivity growth, namely technical change and efficiency change. The former is further decomposed into an output bias, an input bias and a magnitude term to test neutrality. The latter is also decomposed into changes in pure technical efficiency and scale efficiency. In our case, between the pre‐ and post‐APDPTS periods, the efficiency increased only marginally. As a result of a five‐year enhancement programme, the technical regress slowed down slightly, and inward neutral shifts of a transformation frontier were interpreted as being the main contributor to technical regress. In particular, evidence of biased technical change was found, i.e., the effects of output capability increased slightly, but the efficient use of inputs declined during the post‐APDPTS period.

Effect Of Technological Change On Output And Factor Shares In Potato Production In Jos Plateau Area Of Plateau State, Nigeria

This study was carried out in four Local Government Areas in Plateau State – Jos South, Bokkos, Mangu and Barkin Ladi, which were randomly selected from eight noted for potato production. The sample size was 182 used in the analysis of the data. The primary data were collected using structured questionnaires forthnightly. Two improved potato varieties (Nicola and Lady Christy) and one local variety (Empi) were used in this study. The production systems were Furrow/Flood Irrigation and Manual watering.The factor shares in the cost of production were estimated and the technical change biases measured. The factor shares were estimated using a normalized Cobb- Douglas profit function to indirectly estimate the partial elasticities of the Cobb-Douglas production function with constant returns to scale. Capital had the highest cost-share of 57.2% under the Manual watering production system, while labour had the least ( 12.5%). The technological change biases introduced by different potato varieties under the different production systems were factor-saving for labour and fertilizer but factor-using for land and capital in Nicola under Furrow/Flood irrigation production system. Normalized Cobb-Douglas profit function indirectly estimated the partial elasticities of the Cobb-Douglas production functions with constant returns to scale for potato in Jos Plateau. Keywords: Technological change, Cobb-Douglas and Profit functions ,Factor sharesJournal of Agriculture and Social Research Vol. 8 (1) 2008: pp. 18-27

Technology diversity and development: Evidence from China's industrial enterprises

A stylized fact of technical change in developing economies is that of Harrod-neutral labor augmenting technical change arising from capital deepening. While in the aggregate this pattern of technical change is widely observed, at the firm level a variety of channels of technical change and factor biases are possible. Using a large set of firm-level panel data for China’s industrial enterprises, this paper identifies three channels of technical change, each associated with a different pattern of factor bias and underlying firm objective. Autonomous, time-dependent capital-using technical change drives the neoclassical growth process. Robustly labor-using and capital- and energy-savings in-house R&D capitalizes on China’s comparative advantage, and the purchase of imported technologies, which are comparatively capital using, focuses on new product development. As part of its task, internal R&D adapts imported technology to make it more appropriate (i.e. less capital using). These diversified channels of technical change reveal a pattern of developing country technical change that is far more diversified than that suggested by the conventional growth literature.

Classical biased technical change approach and its relevance to reality

The purpose of this article is to evaluate empirically the classical viability condition for East Asia, Latin America, Sub‐Saharan Africa 1980–1995, and advanced countries 1950–1992. The viability condition is proposed by Foley and Michl (1999), and is used for judging empirically which approach is more valid, the classical biased technical change approach or neoclassical production function approach. Our results acknowledge the predominance of the former, which is Foley‐Michl’s contention. However, there remains a disputable interpretation as to the case of a declining labour productivity, which is broadly seen in Latin America and Sub‐Saharan Africa during the period considered.

Many Sectors Meet More Skills: Intersectoral Linkages and the Skill Bias of Technology

This paper presents a novel stylized fact and analyzes its contribution to the skill bias of technical change in U.S. manufacturing. The share of skilled labor embedded in intermediate inputs correlates strongly with the skill share employed in final production. This finding points towards an intersectoral technology-skill complementarity (ITSC). Together with input-output linkages, the observed complementarity delivers a multiplier that reinforces skill demand along the production chain. Reduced-form estimates suggest that the effect is quantitatively important, explaining about as much skill upgrading as outsourcing. Empirical evidence suggests that one channel through which this complementarity works is product innovation. I also analyze the importance of different drivers of skill upgrading over time. While foreign outsourcing and IT capital is associated with skill demand particularly strongly from the 1980s onwards (a period of rapidly increasing skill premia), R&D contributed stably throughout the period 1958-2005. The same is true for ITSC, which augmented within-sector skill bias in a stable fashion throughout the last 5 decades.

Factor Price Equality and Biased Technical Change in a Two-Cone Trade Model

We reconsider the effects of long-run economic growth on relative factor prices across cones of specialization. We model economic growth as exogenous technical change. Allowing for capital biased technical change with a sector bias and for endogenous commodity prices, we find that economic growth may increase or decrease factor price differences across cones. For a neutral demand side and capital biased growth in the most capital intensive sector, we find that economic growth encourages less factor price diversity across cones.

A Brief History of Production Functions

This paper gives an outline of evolution of the concept and econometrics of production function, which was one of the central apparatus of neo-classical economics. It shows how the famous Cobb-Douglas production function was indeed invented by von Thunen and Wicksell, how the CES production function was formulated, how the elasticity of substitution was made a variable and finally how Sato’s function incorporated biased technical changes. It covers almost all specifications proposed during 1950-1975, and further the LINEX production functions and incorporation of energy as an input. The paper in divided into (1) single product functions, (2) joint product functions, and (3) aggregate production functions. It also discusses the ‘capital controversy’ and its impacts.

Structural transformation of the capital stock and capital-saving technical change

We argue that the information technology revolution has brought about the differentiation of secular capital-using and labour-saving direction of technical change. Based on the example of the US manufacturing industry, asset and sector specific differences in the bias of technical change are documented. While the clear ICT- and intangible capital-using bias of technical change is well-documented in the literature, this paper provides evidence for the non-ICT capital-saving bias of technical change in the fifth Kondratieff cycle. In the past decade the US manufacturing sector displayed a noticeable deceleration of capital accumulation and capital intensity increase, a trend that diverges from the one observed in the other two sectors of the economy: in agriculture and in services. Non-ICT capital-saving technical change provokes increasing divergence between the development strategies of technological followers (characterised by tangible investment-led growth, and increasing capital-output ratios), and of technological leaders (marked by increasing intangible capital-intensity and diminishing tangible capital-intensity).

Skill supply and biased technical change

This article contributes to the debate on skill-biased technical change by studying the dynamics of skill supply and wage inequality in an endogenous growth model with ability-biased technical progress. Due to a discouragement effect, rising within groups inequality reduces incentives to become educated for ordinary-ability workers. This mechanism generates a non-monotonic relationship between the growth rate and skill supply driving wage inequality upward during periods of accelerating technical change. This theoretical explanation is consistent with the apparent ambiguous relationship between the relative skill supply and inequality in the last decades in several OECD countries.

Productivity trends in U.S. manufacturing: Evidence from the NQ and AIM cost functions

In this paper, we take the econometric approach to productivity measurement in United States manufacturing, using KLEM data over the period from 1953 to 2001. We are also interested in technical change bias, price elasticities, and elasticities of substitution in the U.S. manufacturing industry. We present an empirical comparison and evaluation of the effectiveness of four well-known flexible cost functions—the locally flexible generalized Leontief (see Diewert [1971. An application of the Shephard duality theorem: a generalized Leontief production function. Journal of Political Economy 79, 481–507]), translog (see Christensen et al. [1975. Transendendal logarithmic utility functions. American Economic Review 65, 367–364]), and normalized quadratic (see Diewert and Wales [1987. Flexible functional forms and global curvature conditions. Econometrica 55, 43–68])—and the globally flexible asymptotically ideal model (see Barnett et al. [1991. Semi-nonparametric Bayesian estimation of the asymptotically ideal production model. Journal of Econometrics 49, 5–50]), the latter modified to introduce technical change by means of Thomsen's [2000. Short cuts to dynamic factor demand modelling. Journal of Econometrics 97, 1–23] factor-augmenting efficiency index approach.

Productivity, convergence and policy: a study of OECD countries and industries

This paper analyses trends in labour productivity and its underlying determinants in a panel of OECD countries from 1979 to 2002. Data Envelopment Analysis (DEA) is used to estimate a Malmquist measure of multifactor productivity (MFP) change. We decompose the growth in labour productivity into (i) net technological change (ii) input biased technical change (IBTC) (iii) efficiency change and (iv) capital accumulation. We analyse the effect of each of these factors in the transition towards the equilibrium growth paths of both labour productivity and per capita GDP for the OECD countries, controlling for the effects of different policies and institutions. The results indicate that on average gaps in productivity or income levels are narrowing down although there is no evidence to suggest that the entire OECD area comprises a single convergence “club”. Using kernel estimation methods we find that that labour productivity and per capita GDP are settling toward a twin peak (bimodal) distribution. Panel unit root tests over an extended (1960–2001) period provide general support for the convergence hypothesis. Analysis of the contributions of productivity growth within industries and sectoral composition changes show that aggregate productivity change is predominantly driven by ‘net’ within sector effects with very little contribution emerging from sectoral shifts (the ‘in-between’ static or dynamic effects resulting from higher or above average productivity industries gaining employment shares or low productivity industries losing shares).

The energy-capital relation—Sweden 1870–2000

This paper explores short and long-run changes in the energy to capital relation. The K/ E ratio is calculated for Sweden 1870–2000, at the national, industrial and branch levels. A basic result is a substantial long-run increase in the K/ E ratio which is positively correlated with the relative price p E/p K. The price response is stronger in energy intensive industries than in labour intensive industries. By considering the useful work (energy services) provided by energy sources, estimated using an aggregate measure of thermodynamic efficiencies, we can conclude, however, that energy services and capital have developed fairly evenly over the 20th century and thus that the long run increase in the K/ E ratio depends on embodied biased technical change. From a natural resource and environmental perspective it is clear that the economy has managed to cope with relatively less energy over time, but with a stationary (near constant) capital to energy services ratio. From a growth perspective our results indicate high complementarity between energy services and capital.

Distant labour supply, skills and induced technical change

To analyze the consequences of new technologies, which make it possible to employ distant labour, we model a developed country with high- and medium-skilled labour interacting with an emerging market economy (EME) with medium- and low-skilled labour. Expansion in labour supply induces medium-skill biased technical change, which raises the demand for such labour. As a result, inequalities tend to fall in the developed country, skill premiums rise marginally in the EME, but equality rises because labour employed in the low-skilled sector shrinks. Inequality falls across the countries since average wages, information and access rise in the EME.

Distant Labour Supply, Skills and Induced Technical Change

To analyze the consequences of new technologies, which make it possible to employ distant labour, we model a developed country with high and medium-skilled labour interacting with an emerging market economy (EME) with medium and low-skilled labour. Expansion in labour supply induces medium-skill biased technical change, which raises the demand for such labour. As a result, inequalities tend to fall in the developed country, skill premiums rise marginally in the EME, but equality rises because labour employed in the low-skilled sector shrinks. Inequality falls across the countries since average wages, information and access rise in the EME.

Market power in tobacco: Measuring multiple markets

AbstractTraditional market power analyses of the U.S. cigarette manufacturing industry consider monopoly power exertion by manufacturers in selling cigarettes to consumers. Market characteristics combined with government policy make it plausible that manufacturers exert monopsony market power in procuring tobacco. We investigate this possibility in the U.S. and international tobacco markets by extending nonparametric tests to include simultaneously potential monopoly market power with potential monopsony market power in multiple input markets, allowing both Hicks‐neutral and biased technical change. We use annual data from the cigarette manufacturing industry from 1977 to 1993. Results indicate substantial departures from competitive pricing in the procurement of domestic tobacco, supporting the postulate that cigarette manufacturers appropriate monopsony rents despite, and perhaps at times through, U.S. tobacco farm policy. Results are less clear with respect to monopsony market power exertion in imported leaf tobacco procurement by cigarette manufacturers. Finally, results indicate that monopoly market power exertion is relatively small and that, when the possibility of monopsony market power exertion is admitted, monopoly market power exertion is no longer problematic.[EconLit citations: L100, L660]. © 2007 Wiley Periodicals, Inc. Agribusiness 23: 35–55, 2007.

Malmquist productivity index decompositions: a unifying framework1

In two widely cited but unpublished working papers, Simar and Wilson (1998) and Zofío and Lovell (1998) proposed an alternative decomposition of the Malmquist Productivity Index, which retained what seemed to be the strongholds of previous proposals with regard to the contribution of technological and efficiency change to productivity change. Namely, a technical change term with regard to the best practice variable returns to scale (VRS) technology, which is to be found in Ray and Desli (1997) and a scale efficiency change term that illustrates a firm's situation with regard to optimal scale (benchmark technology), Färe et al . (1994). Attaining this objective required the introduction of an additional term in the Malmquist Productivity Index decomposition, which would reflect the scale bias of technical change. It is our objective to provide economic rationale for this term within a theory of production context, the existing decompositions and recent articles that further elaborate on this issue. The ideas are illustrated using productivity trends in 17 OECD countries. 1 This article has benefited from conversations with C. A. Knox Lovell, Leopold Simar and Paul Wilson. The author is the sole responsible for any errors in the text.

Energy biased technical change: A CGE analysis

This paper studies energy bias in technical change. For this purpose, we develop a computable general-equilibrium model that builds on endogenous growth models. The model explicitly captures links between energy, the rate and direction of technical change, and the economy. We show the importance of feedback in technical change, substitution possibilities between final goods, and general-equilibrium effects for energy bias in technical change. If the feedback effect is strong, or the substitution elasticity large, or both, our model tends to a corner solution in which only technologies are developed that are appropriate for production of non-energy intensive goods.