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European Review of Agriculture Economics Vol 27 (4) (2000) pp.497-518
© 2000 Oxford University Press and the Foundation for the European Review of Agricultural Economics

Decomposing productivity growth allowing efficiency gains and price-induced technical progress

A Oude Lansink1, E Silva2 and S Stefanou3

1 Wageningen University, Wageningen, Netherlands
2 University of Portugal, Portugal
3 Pennsylvania State University, University Park, PA, USA

Summary

Time- and firm-specific output technical efficiency measures are generated within a price-induced technological change framework. The firm-specific production frontier incorporates past prices as an argument encouraging innovation and a time trend to account for exogenous technical change. The theoretical model is used to decompose total factor productivity into a scale effect, an efficiency change effect and a technological change effect. Input bias arising from exogenous technical change and price-induced innovation is investigated using a multiple-input measure of biased technical change. The empirical focus is on Dutch pot-plant firms during the period 1979-1995 using the maximum entropy estimation method.

Keywords: inter-firm efficiency, price-induced technical change, bias in technical change, maximum entropy


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