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Productivity Development in Selected Central European Countries Measured by the Sato Production Function

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  • Roubalová Lenka

    (Mendel University in Brno, Faculty of Business and Economics, Department of Statistics and Operation Analysis, Zemědělská,Brno, Czech Republic)

  • Viskotová Lenka

    (Mendel University in Brno, Faculty of Business and Economics, Department of Statistics and Operation Analysis, Zemědělská,Brno, Czech Republic)

Abstract

In this paper, we investigate the relationship between economic output, labour and capital in the Visegrád Four, Austria and Germany. The main objective is to determine the type of technological progress in these countries over time, specifically in the period 1995-2015. The Sato production functions (a special case of the linearly homogeneous production function) for all the aforementioned countries are estimated using linear and nonlinear techniques. In addition to the original Sato production function, we propose modifying it in using a time variable, which allows us to analyse the development of productivity over time. Based on the NLS estimates of this modification, we create isoquant maps and calculate the value of the marginal rate of technical substitution of labour for capital to identify the nature of technological progress typical for each country. We also compare the properties of both the OLS and NLS estimates. The results are quite specific to individual countries, but there is some room for generalization.

Suggested Citation

  • Roubalová Lenka & Viskotová Lenka, 2018. "Productivity Development in Selected Central European Countries Measured by the Sato Production Function," Review of Economic Perspectives, Sciendo, vol. 18(4), pages 353-370, December.
    • Handle: RePEc:vrs:reoecp:v:18:y:2018:i:4:p:353-370:n:2
    DOI: 10.2478/revecp-2018-0018
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    References listed on IDEAS

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    1. Anthony J. Makin & Sam Strong, 2013. "New measures of factor productivity in Australia: a Sato approach," Applied Economics, Taylor & Francis Journals, vol. 45(17), pages 2413-2422, June.
    2. Henningsen, Arne & Henningsen, Géraldine, 2012. "On estimation of the CES production function—Revisited," Economics Letters, Elsevier, vol. 115(1), pages 67-69.
    3. Sato, Ryuzo, 1975. "The Most General Class of CES Functions," Econometrica, Econometric Society, vol. 43(5-6), pages 999-1003, Sept.-Nov.
    4. Thomas M. Humphrey, 1997. "Algebraic production functions and their uses before Cobb-Douglas," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 51-83.
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