Australian Coal Mining: Estimating technical change and resource exhaustion in a translog cost function

Abstract

This paper estimates a translog cost function for the Australian coal industry from 1968 to 2001. We use a variable measuring the shift to open-pit mining to capture the impact of technical change, while using a time trend to capture the impact of resource exhaustion. The cost function is estimated with the Zellner's SUR procedure. Technical change is significant in lowering cost, but over time this cost reduction has been largely offset by the impact of resource exhaustion.