Econometrica: Jul, 1979, Volume 47, Issue 4

Frontier Production Functions and Technical Progress: A Study of General Milk Processing in Swedish Dairy Plants

https://doi.org/0012-9682(197907)47:4<883:FPFATP>2.0.CO;2-R
p. 883-900

Finn R. Forsund, Lennart Hjalmarsson

Technical change in general milk processing is estimated on the basis of 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 labor 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 concepts of Farrell.