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The South African Aggregate Production Function: Estimation Of The Constant Elasticity Of Substitution Function

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  • Lumengo Bonga-bonga

Abstract

This paper assesses the validity of the constant elasticity of substitution (CES) and the Cobb-Douglas (CD) production functions in modelling the aggregate production function and computing the total factor productivity (TFP) in South Africa for the period 1970-2006. The CES function is estimated with Nerlove's two-step procedure using the autoregressive distributed lag (ARDL) cointegration and the Kalman filter estimation techniques, while the CD production function is estimated using the Kalman filter technique. The results of the forecast performance of the two model specifications show that the CD specification outperforms the CES for the period 1970-2006, although the CD specification may be too restrictive. Copyright (c) 2009 The Author. Journal compilation (c) 2009 Economic Society of South Africa.

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  • Lumengo Bonga-bonga, 2009. "The South African Aggregate Production Function: Estimation Of The Constant Elasticity Of Substitution Function," South African Journal of Economics, Economic Society of South Africa, vol. 77(2), pages 332-349, June.
  • Handle: RePEc:bla:sajeco:v:77:y:2009:i:2:p:332-349
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    References listed on IDEAS

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    5. Eric Miller, 2008. "An Assessment of CES and Cobb-Douglas Production Functions: Working Paper 2008-05," Working Papers 19992, Congressional Budget Office.
    6. Shaik, Saleem, 2008. "Accounting for (In)Efficiency in the Estimation of Time-Varying Returns to Scale," Agribusiness & Applied Economics Report 44308, North Dakota State University, Department of Agribusiness and Applied Economics.
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    Cited by:

    1. Paul E. Brockway & Matthew K. Heun & JoĆ£o Santos & John R. Barrett, 2017. "Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation," Energies, MDPI, Open Access Journal, vol. 10(2), pages 1-23, February.
    2. Alberto Behar, 2010. "Would Cheaper Capital Replace Labour?," South African Journal of Economics, Economic Society of South Africa, vol. 78(2), pages 131-151, June.
    3. Rulof P. Burger & Francis J. Teal, 2015. "The Effect of Schooling on Worker Productivity: Evidence from a South African Industry Panel," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 24(5), pages 629-644.
    4. Kumar, Saten & Pacheco, Gail & Rossouw, Stephanie, 2010. "How to Increase the Growth Rate in South Africa?," MPRA Paper 26105, University Library of Munich, Germany.
    5. Rankin Neil & Burger Rulof & Kreuser Friedrich, 2015. "The elasticity of substitution and labour-displacing technical change in post-apartheid South Africa," WIDER Working Paper Series 101, World Institute for Development Economic Research (UNU-WIDER).

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