Measuring biases of technical change - The case of cereals displacement in livestock ration formulation in Belgium

Abstract

Persistent feed-price distortions brought about by the CAP has favoured the use of non-grain resources in livestock feeding in the EU. This paper is concerned with the measurement of the rates and biases of technical change which have led to the displacement of cereals in livestock ration formulation. The analysis is applied to the Belgian compound-feed industry, where the displacement of cereals has been striking. An augmented translog cost function is adopted which allows identification of both endogenous (price-induced) and exogenous biases of technical change as well as the calculation of short-run ('static') and long-run ('dynamic') price elasticities of feed input demand. Finally, a decomposition analysis is provided, in which changes in the overall proportions of grains and non-grain feeds used by compounders are explained by substitution, output mix changes, and/or technical change biases.