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Do Inada Conditions imply Cobb-Douglas Asymptotic Behavior or only a Elasticity of Substitution equal to one

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  • de la Fonteijne, Marcel R.

Abstract

Barelli and De Breu Passôa proved that Inada conditions imply asymptotic Cobb-Douglas behavior of the production function. This was corrected by Litina and Palivos by putting that only the elasticity of substitution is equal to one. We will correct both proof and arguments and come up with a proof without limitations, leaving the conclusion of Barelli unaltered but with a less restrictive proof. Furthermore if Inada conditions apply then the elasticity of substitution is bounded.

Suggested Citation

  • de la Fonteijne, Marcel R., 2015. "Do Inada Conditions imply Cobb-Douglas Asymptotic Behavior or only a Elasticity of Substitution equal to one," MPRA Paper 82304, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:82304
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    File URL: https://mpra.ub.uni-muenchen.de/82304/1/MPRA_paper_82304.pdf
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    References listed on IDEAS

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    1. Litina, Anastasia & Palivos, Theodore, 2008. "Do Inada conditions imply that production function must be asymptotically Cobb-Douglas? A comment," Economics Letters, Elsevier, vol. 99(3), pages 498-499, June.
    2. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    3. R. M. Solow, 1971. "Note on Uzawa’s Two-Sector Model of Economic Growth," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 4, pages 27-30, Palgrave Macmillan.
    4. Rainer Klump & Peter McAdam & Alpo Willman, 2012. "The Normalized Ces Production Function: Theory And Empirics," Journal of Economic Surveys, Wiley Blackwell, vol. 26(5), pages 769-799, December.
    5. Ken-ichi Inada, 1963. "On a Two-Sector Model of Economic Growth: Comments and a Generalization," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 30(2), pages 119-127.
    6. Barelli, Paulo & de Abreu Pessoa, Samuel, 2003. "Inada conditions imply that production function must be asymptotically Cobb-Douglas," Economics Letters, Elsevier, vol. 81(3), pages 361-363, December.
    7. F. H. Hahn, 1965. "On Two Sector Growth Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(4), pages 339-346.
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    Cited by:

    1. de la Fonteijne, Marcel R., 2018. "Why the concept of Hicks, Harrod, Solow neutral and even non-neutral augmented technical progress is flawed in principle in any economic model," MPRA Paper 107730, University Library of Munich, Germany.
    2. Ozkaya, Ata, 2021. "Inada conditions asymptotically transform production function into the Cobb–Douglas," Economics Letters, Elsevier, vol. 201(C).

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    More about this item

    Keywords

    Inada condition; production function; elasticity of substitution; Cobb-Douglas;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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