Estimation of Resource-Specific Technological Change in a Production Function
Technological Forecasting and Social Change. DOI: 10.1016/j.techfore.2018.08.006
13 Pages Posted: 25 Jun 2016 Last revised: 16 Aug 2018
Date Written: May 9, 2016
Abstract
Technological change plays a critical role in economic growth. Prevailing approaches to estimation of total technological change are associated with total factor productivity (TFP) based on a Cobb-Douglas (CD) production function. To estimate resource-specific technological change, previous studies typically assume an alternative specific functional form other than a CD function such as a transcendental logarithmic (translog) or a Constant Elasticity of Substitution (CES) function. In this article, we argue that under certain conditions, a resource-specific technological change can be estimated from observed resource intensity/productivity data over time, irrespective of which functional form is adopted. We also illustrate that if the estimated technological change is applied to a CD production function, the estimated resource elasticities can differ considerably from that estimated by the prevailing TFP approach. In our case of a panel data for 40 regions 1995-2009, our approach shows that a CD function is plausible across regions compared to the TFP approach.
Keywords: Resource intensity; Resource productivity; Cobb-Douglas; Translog; CES; resource elasticity; economic growth
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