Efficiency and technological change in the US brewing industry

This study demonstrates that the measurement of technological change and ec onomic efficiency are tightly linked. Efficiency measures may depend on car efully controlling for technological change, while tests of technological c hange may be sensitive to empirical model specifications. Moreover, the stu dy underlines Solow's (1994) and Romer's (1994) admonition that econometric ians should pay attention to industry and institutional evidence in buildin g models of technological change. The empirical results presented here sugg est that there has been substantial technological change in the U.S, brewin g industry from 1950 to 1992, This occurred in the form of a dramatic shift in technology beginning with the introduction of super breweries in about 1972. There has also been a substantial increase in scale economies, which undoubtedly caused many inefficiently small firms to exit the industry duri ng the 1960s and 1970s, Further results suggest that a more complete specif ication of technological change and the stochastic nature of the frontier p roduction function leads to higher and more tenable estimates of efficiency .