Traditional Production Function Research Articles

Where are the industrial technologies in energy–economy models? An innovative CGE approach for steel production in Germany

Top-down computable general equilibrium (CGE) models are used extensively for analysis of energy and climate policies. Energy-intensive industries are usually represented in top-down economic models as abstract economic production functions, commonly of the constant-elasticity-of-substitution (CES) or translog functional form. This study explores methods for improving the realism of energy-intensive industries in top-down economic models. We replace a CES production function with a set of specific technologies and provide a comparison between the traditional production function approach in CGE models and an approach with separate technologies for making iron and steel. In particular, we investigate the response of the iron and steel sector to a set of CO 2 price scenarios. Our technology-based, integrated approach permits a choice between several technologies for producing iron and steel and allows for shifts in technology characteristics over time towards best practice, innovative technologies. In addition, the general equilibrium framework allows us to analyze interactions between production sectors, for example between electricity generation and iron and steel production, investigate simultaneous economy-wide reactions and capture the main driving forces of greenhouse gas emissions reductions under a climate policy. We conclude that technology-specific effects are crucial for the economic assessment of climate policies, in particular the effects relating to process shifts and fuel input structure.

On the Dynamics of Recycling and Natural Resources

We study the dynamic impact of recycling through its effect on the production set of the economy and its relationship with natural resources. The contribution of renewable and recyclable resources for sustainability is studied. Although in the short run recycling may alleviate resource scarcity, in the long run it is not enough to compensate for the exhaustibility of non-renewable resources and the possibility of obtaining non-decreasing output paths crucially depends on the extent to which production rests on renewable resources. Furthermore, recycling interacts with natural resource growth, surprisingly not always favoring sustainability. The Production and Recycling Function is a generalization of the traditional production function, providing an integrated view of regular production and recycling and representing the production set of the economy when a recycling technology is available.

Damage Control Productivity: An Input Damage Abatement Approach

This paper compares the value of the marginal product of three different pesticides from different specifications of the production function. The specifications are the output damage abatement specification proposed by Lichtenberg and Zilberman, a general input damage abatement specification and a traditional production function. These specifications are estimated on panel data of specialised Dutch arable farms over the period 1989–1992, using Generalised Maximum Entropy estimation. Results of the input damage abatement specification show that pesticides have different impacts on individual productive inputs, although statistical evidence is weak. The output damage abatement specification produces statistically more significant relations, but imposes restrictions that are only partly supported by the data. It is also found that estimation of a quadratic traditional production function, that treats damage abatement inputs in the same way as productive inputs, does not lead to over estimation of the value of the marginal product as previous authors have hypothesised.

Seasonal Solow Residuals and Christmas: A Case for Labor Hoarding and Increasing Returns

In aggregate unadjusted data, measured Solow residuals exhibit large seasonal variations. Total Factor Productivity grows rapidly in the fourth quarter at an annual rate of 16 percent and regresses sharply in the first quarter at an annual rate of-24 percent. How much of the total seasonal variation in the measured Solow residual can be explained by Christmas? The answer to this question is surprising. With increasing returns and time-varying labor effort, Christmas is sufficient to explain the seasonal variation in the Solow residual, consumption, average productivity, and output in all four quarters. Our analysis of seasonally unadjusted data uncovers important roles for labor hoarding and increasing returns that are difficult to identify in adjusted data. PRESCOTT ( 1986) HAS ARGUED that the variability of Solow s residual is a reasonable estimate of the variability of exogenous technology shocks. When Solow' s residual is measured using seasonally unadjusted data for the postwar U.S. economy, it exhibits large seasonal variations, growing rapidly in the fourth quarter at an annual rate of 16 percent and falling sharply in the first quarter at an annual rate of - 24 percent. This paper starts from the premise that it is implausible to attribute seasonal variation of this magnitude to changes in the state of technology. We present a model in which all seasonal fluctuations arise from a single demand shift, Christmas. This demand shift, together with misspecification of the traditional production function, leads to large seasonal variation in the Solow residual. We consider two candidates for misspecification, labor hoarding and external increasing returns to scale. Even when technological growth is aseasonal, either candidate in isolation can induce spurious seasonality in the Solow residual. Our general equilibrium analysis indicates that (1) the economy's seasonal patterns in all four quarters may be a response simply to a fourth quarter consumption demand shift and (2) a combination of labor hoarding and external increasing returns is important for replicating these patterns in aggregate quantity variables for the postwar U.S. economy. Since our analysis identifies important roles for labor hoarding and increasing returns, these results have implications for nonseasonal macroeconomic models. Indeed, our analysis im

AN INVESTIGATION OF TECHNICAL INEFFICIENCIES OF PRODUCTION OF WHEAT FARMERS IN FOUR DISTRICTS OF PAKISTAN

A new, single stage model for estimating technical inefficiencies of production in a stochastic frontier production function is applied in the analysis of panel data on wheat farmers in selected districts of Pakistan. The technical inefficiency effects are highly significant, implying that the traditional production function model is inadequate for the analysis of wheat production of the four districts involved. In the district of Faisalabad, for example, technical inefficiencies of production tend to be smaller for older farmers and those with greater formal schooling. In addition, the levels of wheat production for farmers in Faisalabad tend to approach their potential frontier production levels over time, although there is no evidence of technical change. The technical efficiencies of the wheat farmers show considerable variation over time within each district, such that the mean technical efficiencies range from 57 per cent to 79 per cent in the four districts.

Productive efficiency of French grain producers: A latent variable model

In this article we propose to implement a covariance structure analysis to deal with the estimation of a stochastic frontier production function on panel data and the measurement of a time-varying technical efficiency. First, this method solves the potential problem of correlations between input quantities and individual effects. Second, individual effects and efficiency measures can be recovered as a byproduct of the analysis through the so-called factor scores. We implement this approach by fitting to a balanced panel of French grain producers, a parsimonious version of the Cornwell, Schmidt, and Sickles [1990]'s model where technical efficiencies are individual-specific linear functions of time. A specification search shows that this model is preferred to the traditional production function. Results shed light on the temporal pattern of efficiency in the French grain production sector.

Price Support, Acreage Controls, and Efficient Redistribution

This study is concerned with the combination of target price and acreage controls as the two major mechanisms of farm policy. Acreage controls are shown to enhance the efficiency of redistribution under a target price program. More specifically, this study demonstrates that if the traditional Cobb-Douglas production function is assumed, acreage controls do not enhance the efficiency of target price programs in the process of redistributing income to the farm sector. The study proves that if the elasticity of substitution between land and all other inputs is less than one, then the income redistributional costs are likely to be reduced. Moreover, by using an empirical estimate of the elasticity of substitution and farm data for the time period 1984-88, this study demonstrates that acreage control programs have drastically reduced the deadweight losses associated with income redistribution flowing from target price programs. These results lend strong support to the public choice notion that politicians favo...

Nutrition and school achievement

Investments in education have traditionally ignored the productive role of nutrition. This study of the relationships between nutritional status and learning among urban and rural Filipino children shows the possible complementarity of nutrition with other social investments aimed at improving school achievement. A traditional production function of learning approach is used to show the significant association between school achievement and two dimensions of nutritional status. Some of the possible pathways by which nutrition can affect learning are also explored.

Hourly Wages, Piece Rates, Fringe Benefits, and the Allocation of Labor Services

It is typical of labor services supplied by an individual agent that they are offered and used in a specific order, and that successive units in this sequence are not necessarily equally efficient. In this paper we explore the implications of such sequential heterogeneity for the wellbeing of sellers and buyers of labor services under different payment arrangements.' Whether the efficiency of labor hours is measured in terms of some final product produced or in terms of some productive service provided depends on the kind of human effort under consideration. We shall use the term efficiency units to cover all possibilities. Sequential heterogeneity of labor units then implies that successive hours of work during the same day yield variable amounts of efficiency units, or, equivalently, that successive efficiency units are increasingly or decreasingly time consuming. One would expect that the relationship between hours worked and efficiency units produced by the same person during the same day could be described by a function which resembles a textbook production function with output as a function of one input keeping all other inputs fixed [1]. The possible similarity of their shapes should not obscure the different nature of such an efficiency function and the traditional production function. Specifically, diminishing marginal efficiency of labor hours cannot be attributed to the law of variable proportions, but is due to physical or mental fatigue [7]. The efficiency function can be looked upon as a single non-linear activity or production process which transforms a single input (hours) into a single output (efficiency units). This output is sometimes referred to as the service flow from labor [3], and should be used as the homogeneous labor input in the conventional production function. The supply and demand for labor can be expressed in terms of hours or in terms of efficiency units. The choice between these exchange mechanisms is bound to affect the utility

On the Indirect Productivity of Money

The recent approach to the productivity of money in its medium-ofexchange function as it has been developed by authors like Brunner and Meltzer (1971) focuses on the amount of real resources allocated in the exchange activity of an economy; that is, in the purchase and sale of goods (commodities, assets, factors of production). The emergence of a money economy and a higher real quantity of money, respectively, increase the available amount of the original factors of production (capital, labor) for the proper production activity. Consequently, real money balances should be taken into account by the traditional production function. Either one treats them as a third factor of production as it is proposed by Mundell (1971, chap. 5) and Bailey (1971, pp. 54-56, 68-70), ascribing to money a direct productivity, or, as the present note suggests, they have only a derived, indirect productivity, emphasizing the fact that money switches real resources from the exchange activity to the production activity. Even if both approaches may be considered as equivalent with respect to the result that money is productive, the latter constitutes a better analytical device because it reveals some new information on the individual's choice margin to hold money and on the specific shape of the demand curve for real money balances. Referring to a recent empirical study by Sinai and Stokes (1972) who show that, in a Cobb-Douglas production function, the presence of money is highly labor saving (the coefficient of capital services is hardly affected whereas the coefficient of labor services falls at about 20 percent, so the sum of the productive contributions of real balances plus labor is approximately equal to the coefficient of labor services in the production function without money), in what follows we shall assume that the amount of capital employed in the exchange activity is of a rather low magnitude, so we can neglect it. The production function of the economy can be written as

Samuelson on Induced Innovation

Samuelson on Induced Innovation