THE INTERPLAY BETWEEN MICRO-FRONTIER AND SECTORAL SHORT-RUN PRODUCTION-FUNCTIONS

We apply Leif Johansen's dynamic production function framework to the development of the Finnish brewery industry over a 30-year time span, 1955 to 1984, based on micro data (plants). The relationship between t he micro-frontier and short-run industry production functions is analy sed, particularly with respect to the evidence of embodied technical p rogress. The empirical analysis reveals striking differences in the ti me pattern of productivity growth of the two functions, illustrates th e importance of capacity expansion for technical progress at the front ier, and clarifies the distinction between embodied and disembodied te chnical progress.