Technical efficiency and elasticity of input substitution in the Canadian food manufacturing industry

Singh, Aditya
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University of Guelph

The purpose of this study is to estimate technical efficiency and the elasticity of input substitution between factors in production in the Canadian food manufacturing industry. First, the estimated mean technical efficiency of the Canadian food manufacturing industry is 87.5%. Secondly, based on the estimates of Hicks and Morishima elasticities of complementarity measures, capital and labour are substitutes, whereas the capital and energy are complements to each other. Given estimates of technical efficiency, there is only modest scope for increasing aggregate productivity through improvement in technical efficiency. One implication of the findings in the study is that innovation policy that encourages investments in innovation may increase aggregate productivity growth.

Technical Efficiency, Elasticity of Substitution, Stochastic Frontier Analysis, Translog Production Function, Hicks Elasticity of Complementarity, Morishima Elasticity of Complementarity