An Inter-Industry Translog Model of Prices and Technical Change for the West German Economy

This book presents the results of a research project which has been carried out in the Special Research Unit (Sonderforschungs­ bereich) 21 at Bonn University. It is a part of the current research on disaggregated econometric forecasting models with a fully integrated input-output system with variable input co­ efficients where prices are explained as dual variables of the underlying production model. A similar approach has already been used by Knut KUbler "Ein disaggregiertes Prognosesystem fUr die Bundesrepublik, die Unternehmenssektoren", Meisenheim am Glan, 1977. But KUbler assumed Cobb-Douglas production functions. Mean­ while a new approach has been suggested by Jorgenson and others, using more flexible forms of functions, e. g. the translog function as an approximation to any reasonable neo-classical production function, see Hudson and Jorgenson "US Energy Policy and Economic Growth, 1975 - 2000", Bell Journal of Economics and Management SCience, Vol. 5 (1974), page 461 ff. ~ Jorgenson and Fraumeni, "Substitution and Technical Change in Production", Discussion paper No. 752, Harvard Institute of Economic Research, Harvard University, Cambridge/Mass. (1 980) ~ Friede, "Investigation of Producer Behavior in the FRG using the Translog Price Function", Cambrigde/Mass. (1980). Krelle and Pallaschke "A General Demand System", Zeitschrift fUr Nationalokonomie 41 (1981), page 223 ff. suggested another approximation using a Taylor expansion of any reasonable demand system. Nakamura follows the lines of Jorgenson and his collaborators but extends them into new areas and reaches much better results.