Interrelated Factor Demands and Technological Change: An Empirical Assessment of Adjustment for Sectors of the Dutch Economy

Using a translog cost functional form, a formal operational model with an adjustment process according to a first-order autoregressive scheme is presented, that allows the simultaneous determination of factor demands and of technological change in an input–output system. The analysis is carried out for sectors of the Dutch economy over the period 1954–83 and it reveals evidence of the dependence of factor demands on relative prices and on technological change.