Changes in substitutability among inputs and outputs can help farms adapt to economic, technological, or societal changes. However, measurement of technical bias has only been carried out in a static framework, ignoring the confounding effects of technical bias due to adjustment costs. This paper integrates two streams of literature, that is one measuring dynamic inefficiency and the other measuring technical bias, thereby offering non‐parametric measures of technical bias for dynamic production technology. The dynamic framework explains the changes in the extent of output foregone to enable investments. The proposed framework is applied to a panel of data of Lithuanian cereal farms over the period 2004–2014. The results show technical change was, on average, more biased toward increasing output rather than investment. Technical change has been more focused on labor‐usage, relative to land and intermediate consumption in the same period.
- biased technical change, cereal farms, dynamic Luenbergerindicator, total factor productivity