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An Assessment of CES and Cobb-Douglas Production Functions: Working Paper 2008-05

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  • Eric Miller

Abstract

This paper surveys the empirical and theoretical literature on macroeconomic production functions and assesses whether the constant elasticity of substitution (CES) or the Cobb-Douglas specification is more appropriate for use in the CBO’s macroeconomic forecasts. The Cobb-Douglas’s major strengths are its ease of use and its seemingly good empirical fit across many data sets. Unfortunately, the Cobb-Douglas still fits the data well in cases where some of its fundamental assumptions are violated. This suggests that many empirical tests of the Cobb-Douglas are picking up a

Suggested Citation

  • Eric Miller, 2008. "An Assessment of CES and Cobb-Douglas Production Functions: Working Paper 2008-05," Working Papers 19992, Congressional Budget Office.
  • Handle: RePEc:cbo:wpaper:19992
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    File URL: https://www.cbo.gov/sites/default/files/110th-congress-2007-2008/workingpaper/2008-05_0.pdf
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    References listed on IDEAS

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    Cited by:

    1. Bittencourt, Mauricio Vaz Lobo & Sampaio, Armando Vaz, 2011. "Are Dual and Primal Estimations Equivalent in the Presence of Stochastic Errors in Input Demand?," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 31(2), December.
    2. Xavier Fernando Briones Mendoza & Leobaldo Enrique Molero Oliva & Oscar Xavier Calderón Zamora, 2018. "La función de producción Cobb-Douglas en el Ecuador," REVISTA TENDENCIAS, Universidad de Narino, vol. 19(2), pages 45-73, December.
    3. MOHAJAN, Haradhan Kumar, 2021. "Estimation Of Cost Minimization Of Garments Sector By Cobb-Douglas Production Function: Bangladesh Perspective," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 21(2), pages 247-267.
    4. Alessandro Mistretta & Francesco Zollino, 2021. "Recent Trends in Economic Activity and TFP in Italy with a Focus on Embodied Technical Progress," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(1), pages 79-107, March.
    5. Pisey Khin & Ryuta Ray Kato, 2010. "The Impact of the Global Economic Crisis on Cambodia," Economics Bulletin, AccessEcon, vol. 30(3), pages 2346-2370.
    6. Md Aslam Mia & Shamima Nasrin & Zhang Cheng, 2016. "Quality, quantity and financial sustainability of microfinance: Does resource allocation matter?," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(3), pages 1285-1298, May.
    7. Matei, Ani & Matei, Lucica, 2010. "Reducing the Administrative Expenditures as Source for Increasing the Efficiency of Local Governance under Conditions of the Financial Crisis," Apas Papers 150, Academic Public Administration Studies Archive - APAS.
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    9. Paul E. Brockway & Harry Saunders & Matthew K. Heun & Timothy J. Foxon & Julia K. Steinberger & John R. Barrett & Steve Sorrell, 2017. "Energy Rebound as a Potential Threat to a Low-Carbon Future: Findings from a New Exergy-Based National-Level Rebound Approach," Energies, MDPI, vol. 10(1), pages 1-24, January.
    10. Deniz GÜVERCİN, 2018. "Scale and Elasticity Properties of Turkish Agricultural Production Function: Political Economy Approach," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(37).
    11. Mr. Bas B. Bakker, 2015. "Employment and the Great Recession: The Role of Real Wages," IMF Working Papers 2015/229, International Monetary Fund.
    12. David M. Williams, 2021. "Pay and Productivity in Canada: Growing Together, Only Slower than Ever," International Productivity Monitor, Centre for the Study of Living Standards, vol. 40, pages 3-26, Spring.
    13. Muuz Hadush, 2017. "Implication of Animal Feed and Water Scarcity on Labor Allocation, Food Production and Per Capita Food Consumption in Tigrai Region, Ethiopia," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 42(4), pages 59-93, December.
    14. Razzak Weshah A. & Bentour El M., 2013. "Do Developing Countries Benefit from Foreign Direct Investments? An Analysis of Some Arab and Asian Countries," Review of Middle East Economics and Finance, De Gruyter, vol. 9(3), pages 357-388, December.
    15. Paul E. Brockway & Matthew K. Heun & João Santos & John R. Barrett, 2017. "Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation," Energies, MDPI, vol. 10(2), pages 1-23, February.
    16. 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.
    17. Weshah Razzak & Elmostafa Bentour, 2012. "Do Developing Countries Benefit from Foreign Direct Investments?," EERI Research Paper Series EERI_RP_2012_07, Economics and Econometrics Research Institute (EERI), Brussels.
    18. Alessandro Mistretta & Francesco Zollino, 0. "Recent Trends in Economic Activity and TFP in Italy with a Focus on Embodied Technical Progress," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 0, pages 1-29.
    19. Nguyen Ngoc Thach, 2020. "Macroeconomic Growth in Vietnam Transitioned to Market: An Unrestricted VES Framework," Economies, MDPI, vol. 8(3), pages 1-15, July.
    20. Nguyen Ngoc Thach, 2020. "How to Explain When the ES Is Lower Than One? A Bayesian Nonlinear Mixed-Effects Approach," JRFM, MDPI, vol. 13(2), pages 1-17, February.
    21. Shahiduzzaman, Md. & Alam, Khorshed, 2014. "Information technology and its changing roles to economic growth and productivity in Australia," Telecommunications Policy, Elsevier, vol. 38(2), pages 125-135.
    22. Enrica Di Stefano & Daniela Marconi, 2016. "Structural transformation and allocation efficiency in China and India," Temi di discussione (Economic working papers) 1093, Bank of Italy, Economic Research and International Relations Area.
    23. Matthew K. Heun & João Santos & Paul E. Brockway & Randall Pruim & Tiago Domingos & Marco Sakai, 2017. "From Theory to Econometrics to Energy Policy: Cautionary Tales for Policymaking Using Aggregate Production Functions," Energies, MDPI, vol. 10(2), pages 1-44, February.
    24. Małgorzata Gawrycka & Aneta Sobiechowska-Ziegert & Anna Szymczak, 2012. "The Impact of Technological and Structural Changes in the National Economy on the Labour-Capital Relations," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 6(1), March.

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