Abstract
This study analyzed the production structure, factor substitutability and technological change of sawmill industry in Japan. Translog cost function was employed to achieve the objectives using annual data of sawmill output and three inputs: material, labor and capital from 1970 to 2004. Six models, encompassing different restrictions on the translog cost function, were applied to determine the production structure. And the general functional form was selected, which reveals the inappropriateness of the existing research based on the Cobb-Douglas or CES production function. All inputs in the sawmill industry are inelastic substitutes each other, which indicate that the industry has limited options to make input adjustment with respect to changes in relative input prices. There exists the economy of size in the sawmill industry, which exhibits the need for concentration of industry to reduce the production cost. Technological changes are material-neutral, labor-saving and capital-using. Material-neutral technological bias is thought to be one of the factors affecting the depression of the sawmill industry. Total factor productivity growth had been decreased infinitesimally. The technological progress to diminish the cost seemed to be dominated by the negative scale effect. Consequently, the sawmill industry needs to restructure its production structure to increase its productivity.
