Non-neutral Technical Change Research Articles

Drivers of productivity change in water companies: an empirical approach for England and Wales

ABSTRACT In this study, a normalized quadratic cost function was employed to estimate total factor productivity for the water sector in England and Wales over the period 1993–2016. Productivity was then decomposed into technical change and scale effect. Technical change is further broken down into pure technical change, non-neutral technical change, and effects due to scale-augmenting technical change. The water industry increased its productivity annually by 6.1%, with 1.5% corresponding to technical change and 4.5% attributed to the scale effect. Lastly, we discuss some policy implications by linking the productivity results with the regulatory cycle.

Efficiency change, technological change and capital accumulation in Italian regions: a sectoral study

This paper examines the sources of labour productivity in the Italian regions during the period 1980–2004. Five economic sectors are investigated using data envelopment analysis (DEA) and taking into account productive specialisation and sector inefficiencies. Labour productivity change is decomposed into five components by means of Malmquist productivity indices: intra-sector efficiency change, composition efficiency change, input-biased technical change, magnitude component technical change and capital accumulation. Using bootstrap procedure, the components of labour productivity changes are statistically tested. Efficiency analysis shows that productive specialisation is not a source of inefficiency and efficiency gains can be obtained by sector-specific policies. Thus, it is possible to obtain improvements in efficiency in each sector of activity rather than reallocating resources among sectors. The results of the decomposition by sectors reveal heterogeneous sources of growth. The total economy has shown evidence of non-neutral technical change and, it has been found that agriculture, industry and construction experienced capital using technical change. The analysis of the decomposition of the labour productivity growth is complemented by an analysis of β-convergence.

Agricultural Technical Change and Economic Diversity of Farm Households: The Case of Vietnam

This paper investigates the impacts of agricultural technical change on economic diversity of farm households in Vietnam. To develop the empirical analysis, a model is presented in which the estimated impact of agricultural technical changes on economic diversification allows for non-neutral technical change. The paper tests the theoretical predictions of this model by providing empirical evidence of the impact of land consolidation on farm and nonfarm outcomes such as labour supply, profits, labour intensity and productivity. By using different methods aimed at verifying and checking the consistency of the results, we find that land consolidation may reduce on farm labour supply, labour intensity and improve farm profits and productivity. Similarly, it may release more farm labour to nonfarm sectors and increase nonfarm profits. The empirical results show that factor-biased technical change plays an important role in explaining the impact of agricultural technical change on economic diversification in Vietnam.

Technology, Utilization, and Inflation: What Drives the New Keynesian Phillips Curve?

We argue that the New Keynesian Phillips Curve literature has failed to deliver a convincing measure of real marginal costs. We start from a careful modeling of optimal price setting allowing for nonunitary factor substitution, nonneutral technical change, and time‐varying factor utilization rates. This ensures the resulting real marginal cost measures match volatility reductions and level changes witnessed in many U.S. time series. The cost measure comprises conventional countercyclical cost elements plus procyclical (and covarying) utilization rates. Although procyclical elements seem to dominate, the components of real marginal cost components are becoming less cyclical over time. Incorporating this richer driving variable produces more plausible price‐stickiness estimates than otherwise and suggests a more balanced weight of backward‐ and forward‐looking inflation expectations than commonly found. Our results challenge existing views of inflation determinants and have important implications for modeling inflation in New Keynesian models.

Technology, Utilization and Inflation: What Drives the New Keynesian Phillips Curve?

We argue that the New-Keynesian Phillips Curve literature has failed to deliver a convincing measure of real marginal costs. We start from a careful modeling of optimal price setting allowing for non-unitary factor substitution, non-neutral technical change and time-varying factor utilization rates. This ensures the resulting real marginal cost measures match volatility reductions and level changes witnessed in many US time series. The cost measure comprises conventional counter-cyclical cost elements plus pro-cyclical (and co-varying) utilization rates. Although pro-cyclical elements seem to dominate, the components of real marginal cost components are becoming less cyclical over time. Incorporating this richer driving variable produces more plausible price-stickiness estimates than otherwise and suggests a more balanced weight of backward and forward-looking inflation expectations than commonly found. Our results challenge existing views of inflation determinants and have important implications for modeling inflation in New-Keynesian models.

Identifying the Elasticity of Substitution with Biased Technical Change

The capital-labor substitution elasticity and technical biases in production are critical parameters. The received wisdom claims their joint identification is infeasible. We challenge that interpretation. Putting the new approach of “normalized” production functions at the heart of a Monte Carlo analysis we identify the conditions under which identification is feasible and robust. The key result is that jointly modeling the production function and first-order conditions is superior to single-equation approaches especially when merged with “normalization.” Our results will have fundamental implications for production-function estimation under non-neutral technical change, for understanding the empirical relevance of normalization and variability underlying past empirical studies. (JEL E22, O33, O41)

Identifying the Elasticity of Substitution with Biased Technical Change

Despite being critical parameters in many economic fields, the received wisdom, in theoretical and empirical literatures, states that joint identification of the elasticity of capital-labor substitution and technical bias is infeasible. This paper challenges that pessimistic interpretation. Putting the new approach of normalized production functions at the heart of a Monte Carlo analysis we identify the conditions under which identification is feasible and robust. The key result is that the jointly modeling the production function and first-order conditions is superior to single-equation approaches in terms of robustly capturing production and technical parameters, especially when merged with normalization. Our results will have fundamental implications for production-function estimation under non-neutral technical change, for understanding the empirical relevance of normalization and the variability underlying past empirical studies.

Skill-biased technical change in US manufacturing: a general index approach

Abstract This article applies recent advances in productivity and efficiency measurement to the evaluation of skill-biased technical change. Using the general index approach we are able to establish an explicit and unconstrained time path for nonneutral technical change between production and nonproduction labor in US manufacturing industries over the 1959–1996 period. Our findings confirm the prevailing interpretation in the labor economics literature that substantial reductions in the relative share of production labor are attributable to a sustained period of nonneutral technical change. However, we find that skill-biased technical change effects are most evident prior to 1983. This predates the diffusion of personal computer technologies in the workplace and the dramatic wage structure changes associated with the 1980s. In contrast to prevailing alternatives, the general index approach also permits us to explain observed shifts in relative labor demand as a combination of price-induced substitution, nonhomothetic output effects and skill-biased technical change responses to a range of proposed elements.

Estimating and decomposing the rate of technical change in the Swedish pulp and paper industry: A general index approach

The purpose of this paper is to analyse the rate and the impacts of technical change in the Swedish pulp and paper industry. In contrast to earlier research on this industry we replace the standard time trend with time-specific dummy variables enabling the estimation and decomposing of a general index of technical change. The analysis is made within a Translog cost function model, which is estimated using a panel data set with observations across individual paper and board mills over the time period 1974–1994. Our results indicate that the highest rates of technical change have generally occurred during the latter part of this period. Pure technical change is the primary component that has directed technical change over the entire time period. We also find evidence of non-neutral technical change. Energy use has been stimulated by technical improvements while labour use has been discouraged. Also, technical change has had wastepaper and woodpulp using impacts. However, the magnitudes of these latter impacts are relatively small, implying that the increase in wastepaper use during the last decades has mainly been stimulated by relative price changes.

Cooling system of char in coal gasification apparatus : Fujikawa, A. and Egashira, T. Jpn. Kokai Tokkyo Koho JP 2002 302, 683 (Cl. C10J3/46), 18 Oct 2002, Appl. 2001/107,720. (In Japanese)

In contrast to most empirical investigations of the efficiency of multiproduct financial institutions, which either estimate scale and scope economies with a given state of technology, or only analyse technical change in the presence of overall scale economies, this study estimates overall scale economies, product-specific scale economies and scope economies in the presence of both neutral and non-neutral technical change. Also, in contrast to most other empirical studies in this area, standard errors are computed for all relevant statistics. The findings indicate diseconomies of scope; overall diseconomies of scale; product-specific economies are decreasing for investments and increasing for loans; in addition to substantial neutral technical change, biased technical change is labour- and capital-saving and deposits-using in character.

A note on technical change in banking: the case of European savings banks

Using a Fourier flexible form cost function methodology, technical progress is estimated for a large sample of European savings banks between 1989 and 1997. On average, technical progress has reduced savings banks total costs by around 3.4% per annum. Since the European savings banks industry is characterized by technology sharing arrangements, a test is made to determine whether technical change is positively related to bank size. The estimates identify two important features of how technical progress has effected European savings banks' costs. First, costs reductions arising from technical change diminish between 1989 and 1997. Second, technical progress has a bigger impact on reducing large savings banks' costs, chiefly because of its influence on input prices, that is, non-neutral technical change increases systematically with size. This suggests that large savings banks have greater flexibility in reducing costs in response to technical progress, implying that technology sharing arrangements have not led to uniform reductions in banks' total cost. Rather, large savings banks are market leaders and small banks market followers. Since larger banks benefit more from technical progress this may be an important factor promoting consolidation in the European savings banks industry.

A MODEL OF GROWTH AND CONVERGENCE IN THE PRESENCE OF INPUT‐ENHANCING FACTORS: AN EMPIRICAL STUDY

We introduce and estimate a growth model involving non‐neutral technical change characterized by the presence of input‐enhancing factors that vary across countries and serve to offset (and potentially eliminate) diminishing returns to capital. Our empirical results, however, indicate that diminishing returns to capital proves too strong to be overcome by, say, capital‐enhancing factors. Consequently, our model predicts a conditional convergence of output per worker across countries, with the speed of convergence being slower than that found in earlier models involving neutral technical change.

The Skill Bias of Technological Change in Canadian Manufacturing Industries

The paper tests whether technological change has been neutral in Canadian manufacturing industries, using a system of translog cost share equations for 1962 through 1986. The model features two classes of labor treated as distinct inputs. Tests rejected homotheticity in all industries. Hicks neutrality was also rejected in 16 of 18 industries. The most common pattern of nonneutral technical change was a bias away from blue-collar workers. Formal tests for skill-neutral innovation rejected the hypothesis in ten industries in favor of skill-using technical change. The results suggest that in studies of Canadian manufacturing, aggregation across labor inputs is inappropriate.

An empirical analysis of scale and scope economies and technical change in an Irish multiproduct banking firm

In contrast to most empirical investigations of the efficiency of multiproduct financial institutions, which either estimate scale and scope economies with a given state of technology, or only analyse technical change in the presence of overall scale economies, this study estimates overall scale economies, product-specific scale economies and scope economies in the presence of both neutral and non-neutral technical change. Also, in contrast to most other empirical studies in this area, standard errors are computed for all relevant statistics. The findings indicate diseconomies of scope; overall diseconomies of scale; product-specific economies are decreasing for investments and increasing for loans; in addition to substantial neutral technical change, biased technical change is labour- and capital-saving and deposits-using in character.

Production interrelationships and productivity measurement in Irish agriculture

The study presents an empirical analysis of the structure of production in Irish agriculture. A single-output for-input generalized translog cost function model is utilized to obtain econometric measures of substitution between factor inputs, elasticities of input demand, neutral and non-neutral technical change and economies of scale. The cost function model is also used to decompose Tornqvist productivity gains into the contributions due to technical change, scale economies and other (residually measured) influences. Average annual Tornqvist productivity gains of 2.0 percent were found, with the technical change and scale economies effects being computed as 1.33 percent and -0.22 percent per year, respectively, leaving a (residual) measure of other unspecified effects of 0.89 percent per year. Copyright 1990 by Oxford University Press.

Non-neutral technical change, capital, white-collar and blue-collar labor: Some empirical results

The empirical analysis of recent quarterly data for West German industries indicates that technical change is biased in favor of white-collar labor and equipment, while it is biased against blue-collar labor.

Factor prices, non-neutral technical change and regional variations in unemployment rates

This paper provides empirical results which indicate that in the Canadian case regional output and employment sensitivity are not closely associated. The result suggests that causes other than demand variability between regions may explain employment sensitivity differences. A comprehensive theoretical construct based upon regional factor intensity differences in production was developed as an alternative explanation of employment sensitivities to those based simply on regional differences in demand elasticities, efficiencies of technology parameters, or the failure of some regions to efficiently allocate factors of production in accordance with their price ratios.

Urban unemployment and non-immiserizing growth

One purpose of this paper is to show that in the Harris-Todaro economy, economic expansion can not be immiserizing. Another purpose of this paper is to examine the implications of economic expansion for urban unemployment as well as sectoral outputs for the case of non-neutral technical change. Finally, it is shown that a damaging property of the Harris-Todaro model, that capital accumulation causes unemployment to rise whereas labor growth causes it to fall, is at least partially rectified by the incorporation of land as a scarce factor in the agricultural sector.

Alternative Technological Indices and Factor Demands in the Electric Power Industry

The role of technical progress as a means of extending energy resources, together with the widespread use of flexible functional forms, has led to increased interest in the estimation of nonneutral technical change in recent years. Studies by Binswanger (1974), Berndt and Khaled (1979), and Berndt and Wood (1982) at the aggregate level and Wills (1979), Toevs (1980), Moroney and Trapani (1981), and Jorgenson and Fraumeni (1981) at the sectoral level have provided estimates of biased technical change. Stevenson (1980), Gollop and Roberts (1981, 1983), and Nelson (1984, 1986) have also estimated models of nonneutral technical change for the electric power industry. Almost all these studies have two features in common. To begin with, they have employed a time trend to represent the rate at which new technology is introduced.' A recent study by Kopp and Smith (1985), however, indicates that time trends may fail to provide a consistent description of the direction of technical change and calls for the use of technologically explicit indicators of the pace of innovation.

Factor mobility, the elasticity of substitution and interregional wage differentials

The analysis of non-neutral technical change has emphasized the element of factor intensity while ignoring the impact of changes in the elasticity of factor substitution on interregional wage differentials. This paper provides a formalized treatment of changes in the elasticity of factor substitution on interregional wage-rate differentials in the case where labour mobility is present. The paper demonstrates that changes in this element of non-neutral technical change (unlike changes in the factor intensity element) will have differing impacts on regional wage-rates depending on the existing labour-capital ratio in the region. The paper concludes by relating changes in factor intensity to the elasticity of factor substitution to demonstrate the interaction of both elements on non-neutral technical change on regional wage rates.