Cobb-Douglas production function


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Cobb-Douglas production function

a particular physical relationship between OUTPUT of products and FACTOR INPUTS (LABOUR and CAPITAL) used to produce these outputs. This particular form of the PRODUCTION FUNCTION suggests that where there is effective competition in factor markets the ELASTICITY OF TECHNICAL SUBSTITUTION between labour and capital will be equal to one; that is, labour can be substituted for capital in any given proportions, and vice-versa, without affecting output.

The Cobb-Douglas production function suggests that the share of labour input and the share of capital input are relative constants in an economy, so that although labour and capital inputs may change in absolute terms, the relative share between the two inputs remains constant. See PRODUCTION POSSIBILITY BOUNDARY, CAPITAL-LABOUR RATIO, PRODUCTION FUNCTION, CAPITAL-INTENSIVE FIRM/ INDUSTRY, ISOQUANT CURVE, ISOQUANT MAP.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
where the last result uses the formula for steady-state K/Y with a Cobb-Douglas production function from equation (8).
The Cobb-Douglas production function's results revealed that variable of age, land preparation, irrigation, fertilizer and education have positive and significant impact on revenue earned from tuberose.
However, using a parametric Cobb-Douglas production function with composite error, they only examine the neutral and linear effect of EF on production frontier but ignore the nonneutral effects of EF on the marginal productivity of inputs.
Sher and Ahmad (2008) estimated parameters with the Cobb-Douglas production function for wheat using input values from available resources, and also implemented the ARIMA model to forecast wheat production in Pakistan.
We used the standard real business cycle (RBC) model with a log-log utility function and Cobb-Douglas production function. We also used the following well-known parameter values: capital share = 1/3, discount factor = 0.99, depreciation rate = 0.025, preference parameter that measures the relative weight of leisure = 2.0, persistence of technology shock = 0.9 and variance of technology shock = 0.05.
If f(*) is a Cobb-Douglas production function, that is, f(k) = [k.sup.[alpha]], the economy always converges to the so-called steady state where the capital per capita is constant.
The study specified trans-log Cobb-Douglas production function in two ways.
* Employing LR test for (i) production function testing (Cobb Douglas or Translog) with 5% of significant level, Null hypothesis H0: Cobb-Douglas Production function and (ii) Hypothesis testing on whether the existing technical inefficiency with H0: There have not been technical efficiency.
Cobb-Douglas production function can be represented by the functional relationship between accident loss and items of safety investment.