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.

References in periodicals archive ?
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.
Chaudhry (2009) discussed the TFP in Pakistan using the Cobb-Douglas production function (CD-PF) and trans-log production function.
And if gamma and delta remain constant, capital share remains constant, despite r being larger than g, and r larger than g can be consistent with a Cobb-Douglas production function.
Cobb-Douglas production function was applied to measure the productivity ratios and technical progress.
TFP is derived from an estimation of the Cobb-Douglas production function, while the Solow residual is derived from growth accounting.
The well-known Cobb-Douglas production function is amazingly useful in clarifying that growth rates are the sum of three factors: the labor force growth rate, the capital growth rate and the Total Factor Productivity (TFP) growth rate, which is measured as a residual after the labor and capital growth rates have been subtracted from the total economic growth rate.
A constant elasticity of substitution (CES) production function and its special case of the Cobb-Douglas production function are the most popular choices among theoretical modelers.
Many geographers have applied (TFP) Total Factor Productivity with Cobb-Douglas Production Function and primary product yield or conventional yield to develop an indicator for crop productivity measurement [9-10].
1), or a homothetic generalized Cobb-Douglas production function given by (3.
The standard microeconomics model used to describe the relationship between output produced and a set of inputs is the Cobb-Douglas production function.
Our main contribution is to provide sufficient conditions on the parameters of the model--namely, on the exponents of the Cobb-Douglas production function and of the human capital production function, and on the values of random shocks--such that the IFS corresponding to the optimal policy function converges to a unique invariant distribution supported on a (generalized) Sierpinski gasket.
The overall production of a port can be represented by Cobb-Douglas production function (equation 2).