Nonhomotheticity and Technological Bias in Production

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Abstract
This paper develops an approach to estimating non-homotheticity and technological bias within the class of nonhomothetic CES production functions. The model is applied to cross-section firm level data covering seven industries in Mexico, Brazil, Colombia, and four Central American countries for the period 1970-74. Positive nonhomotheticity (higher capital intensity for larger plant size given factor price ratios) is found in six industries. Other results are that, once nonhomotheticity is accounted for, technological bias is not predominantly capital-using, and equality of capital intensity between transnational and domestic firms is pervasive.

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