Estimating technical change in aggregate production functions: A critique

Abstract

This paper extends the approach of Simon and Shaikh and demonstrates that the estimates of aggregate production functions can provide no independent evidence of the underlying technology of the economy. It is further shown that estimates of labour and capital augmenting technical progress will merely be equal, by definition, to the growth rates of real wages and of the real rental price of capital respectively. This is illustrated by reference to recent studies that estimate technical progress for the Australian manufacturing industries. © 1991, Taylor & Francis Group, LLC. All rights reserved.