Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 16: Frontier Production Functions and Technical Progress: A Study of Teneral Milk Processing in Swedish Dairy Plants

Finn R. Førsund and Lennart Hjalmarsson
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Finn R. Førsund: University of Oslo
Lennart Hjalmarsson: Research Institute of Industrial Economics (IFN)

Abstract: Technical change in general milk processing is estimated within a homothetic frontier production function allowing neutrally variable scale elasticity. The results show that technical progress is characterized by a rapid increase in optimal scale and a small capital saving bias, increasing the marginal productivity of labour relative to capital. To characterize technical change, Salter's measures of bias and technical advance are utilized and interpreted within the framework of the efficiency cancepts of Farrell.

Keywords: Agriculture; Technical progress; Production function

JEL-codes: O13; Q16

30 pages, December 1977

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