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"A Theory of Production" The Estimation of the Cobb-Douglas Function: A Retrospective View

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  • Jesus Felipe
  • F. Gerard Adams

Abstract

The Cobb-Douglas production function is still today the most ubiquitous form in theoretical and empirical analyses of growth and productivity. The estimation of the parameters of aggregate production functions is central to much of today's work on growth, technological change, productivity, and labor. This paper has taken up Samuelson's [1979] invitation to verify empirically his claim that all the regression of the Cobb-Douglas [1928] production function does is to reproduce the income accounting identity according to which value added equals the sum of the wage bill plus total profits. This paper concludes that Samuelson was right, and believes that this argument has very serious implications for today's work in macroeconomics.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume31/V31N3P427_445.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 31 (2005)
Issue (Month): 3 (Summer)
Pages: 427-445

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Handle: RePEc:eej:eeconj:v:31:y:2005:i:3:p:427-445

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References

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  1. Pesaran, M. Hashem & Shin, Y. & Smith, R.J., 1999. "Bounds Testing Approaches to the Analysis of Long-run Relationships," Cambridge Working Papers in Economics 9907, Faculty of Economics, University of Cambridge.
  2. Bardsen, Gunnar, 1989. "Estimation of Long Run Coefficients in Error Correction Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 345-50, August.
  3. Fisher, Franklin M, 1969. "The Existence of Aggregate Production Functions," Econometrica, Econometric Society, vol. 37(4), pages 553-77, October.
  4. Shaikh, Anwar, 1974. "Laws of Production and Laws of Algebra: The Humbug Production Function," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 115-20, February.
  5. Samuelson, Paul A, 1979. "Paul Douglas's Measurement of Production Functions and Marginal Productivities," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 923-39, October.
  6. Jesus Felipe & Franklin M. Fisher, 2003. "Aggregation in Production Functions: What Applied Economists should Know," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 208-262, 05.
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Citations

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Cited by:
  1. Jesus Felipe, 2005. "Aggregate Investment In The People'S Republic Of China: A Comment," CAMA Working Papers 2005-17, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Jesus Felipe & J. S. L. Mccombie, 2007. "On the Rental Price of Capital and the Profit Rate: The Perils and Pitfalls of Total Factor Productivity Growth," Review of Political Economy, Taylor & Francis Journals, vol. 19(3), pages 317-345.
  3. Mishra, SK, 2007. "Globalization and its Effects on Regional Variations in Factor Substitution and Returns to Scale in the Indian Factory Sector," MPRA Paper 3265, University Library of Munich, Germany.
  4. Ronny Mazzocchi, 2013. "Investment-Saving Imbalances with Endogenous Capital Stock," DEM Discussion Papers 2013/14, Department of Economics and Management.
  5. Hans Frost & Peder Andersen & Ayoe Hoff, 2013. "Management of Complex Fisheries: Lessons Learned from a Simulation Model," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 61(2), pages 283-307, 06.
  6. Jesus Felipe & Carsten Holz, 2001. "Why do Aggregate Production Functions Work? Fisher's simulations, Shaikh's identity and some new results," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(3), pages 261-285.
  7. Frédéric Reynès, 2011. "The cobb-douglas function as an approximation of other functions," Sciences Po publications 2011-21, Sciences Po.
  8. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09i29kgilc0 is not listed on IDEAS

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