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Staff Paper No. 411 - Abstract

The Source of Technical Change in Italian Agriculture: A Latent Variable Approach

Roberto Esposti
Pierpaolo Pierani

Staff Paper No. 411, April 1997, 24p.


An alternative approach to the measurement of technical change is proposed. It is based on the explicit introduction of the variable "state of technology" into the dual representation of production. A theoretical hypothesis about generation of technical progress in the agricultural sector is formulated. By adding measurement error equations the model can be viewed as a MIMIC model. A maximum likelihood technique involving the implicit covariance matrix provides the estimation of the parameters of the model. Moreover, a Bayesian estimation of the latent variable is obtained. This approach is applied to the Italian agricultural sector during the period 1961-1991. The results provide some evidence about the source and the nature of technical change.
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