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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

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  • 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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