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The cobb-douglas function as an approximation of other functions

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  • Frédéric Reynès

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

By defining the Variable Output Elasticities Cobb-Douglas function, this article shows that a large class of production functions can be approximated by a Cobb-Douglas function with nonconstant output elasticity. Compared to standard flexible functions such as the Translog function, this framework has several advantages. It requires only the use of the first order approximation while respecting the theoretical curvature conditions of the isoquants. This greatly facilitates the deduction of linear input demands function without the need of involving the duality theorem. Moreover, it allows for a generalization of the CES function to the case where the elasticity of substitution between each pair of inputs is not necessarily the same.

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  • Frédéric Reynès, 2011. "The cobb-douglas function as an approximation of other functions," SciencePo Working papers Main hal-01069515, HAL.
    • Handle: RePEc:hal:spmain:hal-01069515
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01069515
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    References listed on IDEAS

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