Testing for Output Substitution Possibilities in Cod Fish Processing in Norway

The catch of cod in Norway is processed into a variety of final products, most of which are exported. The main product categories are salted, dried and frozen products. Most processors have some choice as to which type of product to produce. Our hypothesis is that the choice of product type is decided by the prices of exported products, through their determination of profitability. The paper examines the degree of substitutability between these types of output, using a translog function. A significant degree of substitutability is found between frozen and salted products, while there is hardly any trace of substitutability between dried and other types of products. The variations in the processing of dried fish are apparently better explained by other variables than price movements, such as market access.