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Inada Conditions and the Law of Diminishing Returns

Author

Listed:
  • Rolf Fare

    (Department of Economics, Oregon State University, U.S.A.)

  • Daniel Primont

    (Department of Economics, Southern Illinois University, U.S.A.)

Abstract

Inada (1963) provided properties of the production function that are useful in the study of economic growth. Shephard (1970a) provided an axiomatic approach to the study of production theory. He applied these axioms to give a formal statement of the law of diminishing returns [(Shephard, 1970b)]. In this paper we demonstrate that the Inada conditions and the law of diminishing returns, as articulated by Shephard, are fundamentally inconsistent. Thus one is forced to make a choice between the two models when studying productivity and growth.

Suggested Citation

  • Rolf Fare & Daniel Primont, 2002. "Inada Conditions and the Law of Diminishing Returns," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 1(1), pages 1-8, April.
    • Handle: RePEc:ijb:journl:v:1:y:2002:i:1:p:1-8
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    References listed on IDEAS

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    1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
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    Cited by:

    1. Chatterjee, Partha & Shukayev, Malik, 2008. "Note on positive lower bound of capital in the stochastic growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2137-2147, July.
    2. Mahan Tahvildari, 2021. "Forward indifference valuation and hedging of basis risk under partial information," Papers 2101.00251, arXiv.org.

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    More about this item

    Keywords

    production; growth;

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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