Biases of Technical Change in South African Agriculture: A Cost Function Approach

Abstract

This paper exploits the properties of the third order approximation of the translog cost function which allows nested tests regarding the nature of technical change and specifically a direct test for price-induced technical change. Using data from 1949 to 1990 the input demand elasticities and factor saving biases were estimated for South African agriculture. Large machinery-using biases of technical change were evident with no labour-using biases. This, together with substitutability between machinery and labour, has-not contributed to alleviating the unemployment problem currently faced in South Africa. The hypothesis of no price induced bias was rejected suggesting that changing pricing policies may be a consideration for alleviating the current technology biases in South African agriculture.