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Testing the Fit of Cobb-Douglass Production Function Within Unrestricted Least Squares

Author

Listed:
  • Joseph I. Amuka

    (Department of Economics, University of Nigeria Nsukka, Enugu, Nigeria)

  • Fredrick O. Asogwa

    (Department of Economics, University of Nigeria Nsukka, Enugu, Nigeria)

  • Collins C. Ugwu

    (Department of Accountancy, Federal University Wukara, Taraba, Nigeria,)

  • Kelvin C. Ugwu

    (Department of Economics, University of Nigeria Nsukka, Enugu, Nigeria.)

Abstract

Criticisms trailed Cobb-Douglass production model and its constant returns to Scale assumption after its application in America Economy in 1927. Studies using restricted least squares approach to validate the model have produced different results in different economies. The question this paper tried to answer is this-without restriction, can Cobb-Douglass model still fit well in an economy's production? We answered this question using unrestricted least squares method with quarterly data generated from Central Bank of Nigeria between 2009 and 2012. The study is very important in Nigeria where the economy has not performed well despite heavy government investment in the last two decades. Result from the shows that even without restriction, Nigeria economy displays constant returns to scale production, suggesting that the Cobb-Douglass Production Function fits well in Nigeria economy. The result has an implication for a country in which the economy is driven by the public sector.

Suggested Citation

  • Joseph I. Amuka & Fredrick O. Asogwa & Collins C. Ugwu & Kelvin C. Ugwu, 2018. "Testing the Fit of Cobb-Douglass Production Function Within Unrestricted Least Squares," International Journal of Economics and Financial Issues, Econjournals, vol. 8(3), pages 142-147.
    • Handle: RePEc:eco:journ1:2018-03-18
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    References listed on IDEAS

    as
    1. Antràs Pol, 2004. "Is the U.S. Aggregate Production Function Cobb-Douglas? New Estimates of the Elasticity of Substitution," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-36, April.
    2. Duffy, John & Papageorgiou, Chris, 2000. "A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
    3. Jesus Felipe & F. Gerard Adams, 2005. ""A Theory of Production" The Estimation of the Cobb-Douglas Function: A Retrospective View," Eastern Economic Journal, Eastern Economic Association, vol. 31(3), pages 427-445, Summer.
    4. Jeff Biddle, 2012. "Retrospectives: The Introduction of the Cobb-Douglas Regression," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 223-236, Spring.
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    More about this item

    Keywords

    Cobb-Douglass; Production Function; Constant Returns; Unrestricted Least Square;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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