Structural Change, Capital Investment and Productivity in the Food Processing Industry

Abstract Investment in new technology affects structural change and economic performance through its effect on capital and input composition. This is particularly important for capital‐intensive industries such as food processing, which lack short‐run flexibility due to adjustment costs. This study considers the impacts of capital quasi‐fixity on capital and noncapital input decisions made in the U.S. Food and Kindred Products industry from 1965 to 1991. A cost‐based production theory model is used to evaluate investment motivations for three capital components. Productivity growth accompanying changing input patterns is then discussed, focusing on capital and farm input demand.