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Test der neoklassischen Produktionsfunktion
[Testing the neoclassical production function]

Author

Listed:
  • Quaas, Georg

Abstract

The Cobb-Douglas production function has applications for firms, branches, industries, and for the macro-economies of nation-states as a whole. Throughout the course of his life, with the exception of his years as a senator, Paul H. Douglas consistently strived to gather all the supporting empirical evidence he could. Among others, he placed his hope in his former student, Paul A. Samuelson, and in Samuelson’s colleague Robert M. Solow, who pushed the production function forward “into new and more sophisticated fields.” Meanwhile, plenty of data on capital, labor, and output are available, but it seems as though no one is interested anymore in either the empirical evidence or the underlying logic of Solow’s sophisticated version of the old Cobb-Douglas theory. In this study, his method of segregating variations in output per head due to technical change from those due to changes in the availability of capital per head is applied to the (West) German economy. The temporal domain covers the development of the West German economy from 1950 to 1990 and after German unification, from 1991 to 2015. Even though it turns out that the underlying, true production functions are very similar, ex post prognoses of real wages with the help of the approximated first derivation of the complete production function are much better in the earlier than in the later period. This raises the question of whether factors are paid their marginal cost. Because the study is thought to serve as teaching material, certain mathematics concerning the production function are added. Several problems regarding the accurate testing of the function on the basis of Germany’s National Account dataset are discussed. Patterns that are consequences of the theory are confronted with empirical evidence resulting from 67 years of economic development. It might well be of political importance that the upward shift of the production function hypothetically caused by technical change has a tendency to fall.

Suggested Citation

  • Quaas, Georg, 2018. "Test der neoklassischen Produktionsfunktion [Testing the neoclassical production function]," MPRA Paper 86368, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:86368
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    References listed on IDEAS

    as
    1. 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.
    2. Quaas, Georg, 2007. "Das Saldenmechanische Modell von Fritz Helmedag und die Empirie," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW - Leibniz Information Centre for Economics, vol. 87(6), pages 406-412.
    3. James M. Buchanan & Yong J. Yoon, 1999. "Generalized Increasing Returns, Euler's Theorem, and Competitive Equilibrium," History of Political Economy, Duke University Press, vol. 31(3), pages 511-523, Fall.
    4. Douglas, Paul H, 1976. "The Cobb-Douglas Production Function Once Again: Its History, Its Testing, and Some New Empirical Values," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 903-915, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    production function; technical change; Cobb; Douglas; Solow; development of the German economy;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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