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Arguing A Case For The Cobb-Douglas Production Function

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  • K V Bhanu Murthy

    (Department of Commerce, Delhi School of Economics)

Abstract

The paper argues that Cobb-Douglas (CD) production function merits use for analysing the production process, not because it should be looked upon as a simple tool which can be handled easily or as a crude remedy for estimation, but because of the advantages it possesses. These advantages are due to the fact that it can handle multiple inputs in its generalised form. Even in the face of imperfections in the market it does not introduce distortions of its own. Unconstrained CD-function further increases its potentialities to handle different scales of production. Various econometric estimation problems, such as serial correlation, hetroscidasticity and multicolinearity can be handled adequately and easily. It is argued that most of its criticism is focussed on its inflexibility and admits that except for one obvious assumptions all other assumptions can be relaxed. It is further argued that it facilitates computations and has the properties of explicit representability, uniformity, parsimony and flexibility. Even the problem of simultaneity can be overcome. The paper argues that aggregate technology can also be well represented by it.

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Bibliographic Info

Paper provided by EconWPA in its series Econometrics with number 0409012.

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Length: 11 pages
Date of creation: 25 Sep 2004
Date of revision:
Handle: RePEc:wpa:wuwpem:0409012

Note: Type of Document - doc; pages: 11
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Web page: http://128.118.178.162

Related research

Keywords: Production; Functional Form;

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  1. Lau, Lawrence J., 1986. "Functional forms in econometric model building," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 26, pages 1515-1566 Elsevier.
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Cited by:
  1. Jules Leichter & Cristina Mocci & Stefania Pozzuoli, . "Measuring External Competitiveness:An Overview," Working Papers 2, Department of the Treasury, Ministry of the Economy and of Finance.

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