The Fisher/Cobb-Douglas Paradox, Factor Shares, and Cointegration
AbstractThis note uses insights from cointegration analysis to reexamine two separate but related issues concerning the estimation of production function parameters. Fisher (1971) documented a paradox in estimating substitution elasticities -- the puzzling divorce between the technology underlying his simulated data and the technology estimated from these data. This note both resolves the Paradox and, based on this resolution, raises important questions about estimation strategies (pioneered by Caballero, 1994) that rely on cointegration to recover production function parameters.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1998.
Date of creation: 2007
Date of revision:
production function elasticities; cointegration;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
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