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Abstract
In this paper, the dual approach to ex ante research evaluation in a multiple-input, multiple-output
industry is explained and demonstrated. A simplified, illustrative model is developed based on a number
of fundamental characteristics of the Australian wool industry and output-augmenting technical change.
A normalised quadratic restricted profit function of Australian wool production is specified in terms of
effective rather than actual prices. The estimated short-run supply elasticities are quite inelastic. The
results of the simplified model show that the development and adoption of a 10 per cent yield-increasing
wool technology would result in a 19.6 per cent fall in the actual price of wool and a 9.8 per cent
increase in the actual quantity of wool produced. The cross-commodity effects of the technology are
also allowed for in the model, with actual livestock production falling by 0.6 per cent, actual labour
usage increasing by 0.3 per cent and actual crop production increasing by 1.3 per cent. Overall, in the
short-run, the introduction of the specified wool yield-increasing technology results in a 17.1 per cent
decrease in wool producer profits.