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Specification of functional form and the estimation of technical progress

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The use of the Translog functional form to estimate technical progress may result in misleading conclusions. Alternative analytic functional forms in the demand system approach to measuring technical progress are compared empirically. Specifically, Translog, Normalized Quadratic and Leontief functional forms are used in combination with linear representations of the time trend variable in the respective demand systems. Comparisons are made with the Fisher quantity index approach to measuring technical progress. There is some indication that curvature violations by the Translog model can lead to misleading results, suggesting a preference for even the inflexible Leontief model. Data for New Zealand was used as there is much interest in the relative decline in per capita income since the 1950s and the effects on productivity of the economic reforms of the 1980s. Using data for the period 1960-1989 it was found that productivity growth has been low over the sample.

Document Type: Research Article


Publication date: 1996-08-01

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